CMV: There should be a regulation against money losing IPOs
Tldr: Loss making IPOs - specially B2C - are a wealth transfer mechanism from the 99.99% to the 0.01% and YOU are an unwilling participant
Zynga, Snap, Groupon, Gopro, Fitbit, Blue Apron.. All loss making unicorns that are currently trading below IPO price.
Let’s ask outselves: Who had anything to gain or lose?
VC - Big winner, multiples are always 1-2x. No one gets paid a cent before VCs get all their money back
I Banks - Win or lose, they will generate hype and price right for “the pop”
Founders - Bravo, well deserved
First 100 employees - 👍🏽 <— this is not meant as a thumbs up symbol
Retail investors - huge 👍🏽
Democratic socialists : Shouldn’t there be a regulation prohibiting such companies from going public? Literally two months ago only accredited investors were allowed to buy into lyft, and now any idiot can, while lyft’s balance sheet has almost remained the same. Makes no sense. Benjamin Graham is turning in his grave
Libertarians and Conservatives : You may ask why am I complaining? I have the perfect liberty to not invest in companies I don’t believe in. Right? Think again. If your 401k has VTTVX, VFORX, VFIFX or any of the target date funds, total market funds, YOU subsidized these loss making companies. YOU contributed to the 7 figure IB bonuses. When the hype dies down and tech PE ratios drop down to realistic levels, your 401ks will get 👍🏽
Those planning to throw counter-examples like AMZN in my face, AMZN is bit of an anomaly. They were reinvesting profits for growth instead of posting profits just before IPO, and no one other than daddy Bezos saw AWS going big. Most of the successful IPOs have been B2B: Okta, Twlo, zscaler
Have a great weekend everybody! 🍿