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Large IPOs and Record IPO Calendars Can be Warning Signs of Rough Times Ahead for Stock Market

Large IPOs typically occur during times when stocks are fashionable to own.   Large IPO’s with large one day pops are synonymous with a high-risk stock market environment fueled by overly optimistic investors. The chart below from www.sentimentrader.com shows big market drops after 2000 and 2007 and flat performance following 2014 after big IPOs had big first-day jumps  Lyft’s recent $2.2 billion offering qualified in size but not in terms of first-day  performance. On the other hand Lyft had no trouble raising a huge $2.2 billion from investors who ignored the fact that it went public with the largest EBIDTA loss for any IPO ever. It also should be noted that record IPO calendars also can be a sign of too much market exuberance. Renaissance Capital projects 2019 will have a huge IPO calendar amounting to over $100-plus billion. That’s similar to previous record years of 2000, 2007 and 2014. And we already have discussed what happened back then.

Large IPOs and Record IPO Calendars Can be Warning Signs of Rough Times Ahead for Stock Market
Large IPOs and Record IPO Calendars Can be Warning Signs of Rough Times Ahead for Stock Market

Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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