38% IPO Gains are Becoming Routine
There’s no time like the present for an initial public offering (IPO). We’re seeing new stocks go on sale left, right, and center, making plain just how bullish the markets are feeling right now. Twenty-eight new companies hit the market in June. The average first-session gains for those stocks; 38%!
The IPO market going crazy is one of the most prescient predictors of an imminent crash, just putting that out there. This is not the new normal. However, we can understand it with some analysis.
There’s been a shock to markets. The business shutdown has left countless companies gasping for air, money, financing, free financing is possible, and that’s what companies are reaching for with new stock offerings. It’s something you do to raise funds, and now is when most funds can be raised, as central banks have revived an appetite for stocks.
If you look closely, almost all the companies going public right now are unprofitable, have drawn credit lines, sought PPP, billionaire bailouts, and there are thousands of companies already listed that are issuing more shares for sale, companies in need with opportune execs. The public is confidently taking ownership of businesses to keep businesses going!
The best instrument to get exposure to more initial public offerings is the Renaissance IPO exchange-traded fund (ETF). Its doubled in value in a single quarter. It’s never done that before.
The IPO with the most fizzle so far has been Lemonade, an insurance business. We’ll probably see another EV stock, Fisker, join the market through a SPAC next week as well, so keep an eye on the ticker tape!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.