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Stock Market Risk Grows with Explosion of Negative-Earning IPOs

As the chart from Topdown Charts shows about 76% of recent IPOs have gone public with negative earnings. That’s a near record, matching 1999 and only surpassed by 2000 when the dot.com bubble burst. Why is this an ominous sign? Historically the percentage of risky IPOs increases dramatically near market tops. That’s because investors have become overly optimistic and are willing to make increasingly speculative bets.  And that also spells opportunity for venture capitalists and bankers to sell and profit from increasingly risky IPOs as long as investors are willing to place their bets.

Stock Market Risk Grows with Explosion of Negative-Earning IPOs
Stock Market Risk Grows with Explosion of Negative-Earning IPOs

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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