What the Heck’s Wrong with This Market? Biggest IPO of the Year Sags to New Low

Hot air keeps hissing out of it.

Shares of parcel-delivery company ZTO Express dropped another 4.9% today on the New York Stock Exchange and closed at a new all-time low of $15.20. The previous all-time low had been obtained the day it went public on October 27: it plunged 15% from its IPO price of $19.50. The IPO had raised $1.4 billion, the largest US IPO of 2016.

It is now down 22% from its IPO price. The company is based in Shanghai and doing all its business in China. Why did it go public on the NYSE? We assume because that’s where the money is.

And because its toxic dual-class share structure is illegal in China. It gives founder Lai Meisong 80% voting power in the company. The shares traded on the NYSE are not actually shares of the Chinese company anyway, but shares of a “variable-interest entity” set up in the Cayman Islands, which is contractually entitled to the profits of the Chinese company.

But that can’t be the reason the shares have plunged. Alibaba has a similar setup, and US investors have swallowed it hook, line, and sinker.

“The air is starting to come out of these highly valued technology companies,” explained Kathleen Smith, principal at Renaissance Capital, the day of the 15% plunge that came after some US Tech IPO stocks had already plunged.

But the underwriters took their fees and smiled, including Morgan Stanley, Goldman Sachs, China Renaissance, Citigroup, Credit Suisse, and JPMorgan Chase.

After a historically terrible first quarter and a very crummy first half, IPOs were stacking up in the pipeline with sky-high “valuations” and no place to go. But as markets were recovering from the February trough, Wall Street hoped that after Labor Day, the pipeline would burst open, and IPOs would gush out into the soaring markets, and money could once again change hands.

And this sort-of happened. September 5, Dealogic announced that technology IPOs “are poised for a rebound in September” and called it the “September IPO comeback.”

By the time the month was over, globally 32 Tech IPOs had been pushed out that infamous “IPO window,” which is only open when markets are riding high, and when anything gets bought. $4.3 billion were raised. According to Dealogic, it was the third most active September on record for the Tech sector, “following the tech bubble years of 2000 (49 IPOs, $2.8 billion) and 1999 (46 IPOs, $2.5 billion).”

So that was promising.

Only 17 Tech IPOs had made it by Labor Day, the lowest for the period since 2009. The September generation of six Tech IPOs in the US included the second “unicorn” to go public this year, Nutanix. It raised $238 million on September 29. The first “unicorn” to make it this year was Twilio, which raised $173 million in June.

In October, things looked even rosier, according to Dealogic: 21 IPOs priced on US exchanges, making it the busiest month since June 2015.

Alas, it’s already falling apart.

The big star this year, Twilio, which soared from its IPO price of $15 a share to $70.96 by late September, has since gotten crushed. Today, it closed at $31.53, down 55% in just five weeks.

Nutanix, which shot from its IPO price of $16 a share to $46.78 in two days, closed today at $24.13, down 48% in one month.

These were the big IPO heroes. In the broader IPO space, the scenario has lost its rosy glitter as well. The Renaissance US IPO Index, which tracks stocks for two years after their IPO, is now down 6% year-to-date, down 21% since its peak in April 2015, and down 8% from its recent peak on September 22.

This doesn’t mean that there won’t be a lot more IPOs. And some will actually turn into wildly successful, profitable companies, like Twitter…. Oh well, scratch that. Bad example.

October was merger-mania month: five of the largest 11 US-focused acquisitions in 2016 were announced in the last ten days of October, including two that broke industry records. Read…  Is Merger-Mania October the Classic Paroxysm before it All Comes Unglued?

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  48 comments for “What the Heck’s Wrong with This Market? Biggest IPO of the Year Sags to New Low

  1. Chicken says:

    SEC looks the other way while Fred Wilson and his ilk work their magic?

  2. Doug says:

    FANGS have lost over 100 billion in market value in a week . Tech bubble 2.0 busting?

  3. NotSoSure says:

    I have an acquaintance working in Nutanix. He joined sometime last year, so he was pretty smug when I met him a couple of days after the IPO. Given that he’s still in the lockout period, I bet you he will be a lot less smug the next time we meet.

    I am betting below 10 bucks in 3 months, making him underwater in his options.

    I work in tech, but I pray every day for the bubble to burst like crazy. I may not have a job down the line, but the satisfaction from seeing a**holes losing their shirt will make up for it.

    • Michael Fiorillo says:

      Yes, watching these insufferably smug people take it in the neck will be a real pleasure, but more importantly, it might also cause the masses to step back and stop being so credulous about the digital Market/National Security State and its bogus techno-utopianism.

    • Al says:


    • CrazyCooter says:

      Having worked in tech during the first bubble (late 90s) – I completely empathize with your outlook.

      What would really make my happy though is “do-no-evil” Google getting their ass handed to them.



      • NotSoSure says:

        +1000. Although when they say “do no evil”, what they really mean is that other people shouldn’t do any evil. Since they are a data driven company, it should be clear to anyone paying attention that evil pays in this world. Otherwise why would people keep doing it.

  4. Petunia says:

    The AOL Time Warner deal signaled the dot com bust and now we have the ATT Time Warner deal. I don’t have a good feeling about this one either.

    • chuckie t. says:

      Oh no this time is different. We are in a new age where brilliant people will continue to invent new amazing things that can be monetized.

      In 1929, they thought the telephone and automobile and other great inventions will keep the 20’s roaring.

    • CrazyCooter says:

      I tried really hard to come up with some clever word play around the TT/OL which is pretty much the spread – I just couldn’t get there – maybe someone else here on WS can have some fun with that.



    • MC says:

      We haven’t seen the end of M&A.
      I personally believe the more insane deals are yet to come and they will come from outside the US: always remember the largest M&A deal of all times is still Vodafone’s acquisition of German telecom giant Mannesmann. It was worth US $202 billion… in 1999 money.

      With real growth stagnating worldwide, CEO’s and presidents will turn to the US example and simply use the cheap credit now available to “buy” growth.
      Softbank of Japan has been on a buying spree in the last three years and recently Nippon Yusen, Mitsui OSK Lines and Kawasaki KK have announced a three way merger.
      ChemChina bought Italo-German tyre manufacturer Pirelli late last year and recently announced it will buy Syngenta if Swiss authorities clear the deal.

      The world has got not merely a whole lot crazier, but a whole lot smaller as well.

      • Petunia says:

        I don’t disagree that M&A will get crazier and crazier in the US and Europe. But I never view consolidation in Japan the same way. I think of all large Japanese multinationals as an extension of the Japanese govt, the new shoguns. When viewed this way, those buying sprees may make more sense.

  5. chuckie T. says:

    I just want to say GoPro and Fitbit are down the tubes. So Fitbit moved into the Transamerica Building? Are they going to be a stable tenant? All the stable, long term tenants have been replaced with high flying tech companies that seemed to be fads like one hit wonders.

    • MC says:

      Thanks for bringing up GoPro: from $80-90 at the end of 2014 to stably trading under $15 these days.
      It’s the same trajectory as Twilio: at a given point investors realize the company may sell a nice slick product but that product is hardly unique, whatever is cloud storage or video cameras.

      FitBit is the same thing: the local Chinese-owned department store sells FitBit clones starting at ten bucks and I am sure they may be had for cheaper on the Internet. They may not work as well as the original and may not last as long, but prove the technology which propelled FitBit shares to over $45 is not unique in any way, shape or form.

      • Chuckle T. says:

        The problem with Fitbit, you perfectly illustrated. Anyone of the mega consumer electronics firms from China, Japan and South Korea will swoop in and provide a cheaper and in some cases better products. I love Japanese consumer electronic products they are the best and at the best price.

        I have no “loyalty” to American brands because they have no loyalty to me or this nation.

        The same story line with GoPro. Any one of those umpteen, countless endless consumer electronics firms can add a GoPro type camera to their huge line of consumer electronics products and leverage their manufacturing base. How many people really need a GoPro camera to film themselves snowboarding? Is that really that great of a product?

        Beats headphones are another fraud. Are you telling me Beats is better than Sony? Sony makes better headphones that do not hurt my ears and they are cheaper and last longer! I kid you not my $15 Sony earbuds lasted for 9 months versus some crappy overpriced Beats headphones. Sony are damn good at what they do and they invented the Walkman the first portable music player!

        Tesla, perhaps will face the same fate too. Once some damn good Japanese or German automakers start offering electric vehicles at good prices that will usher in the electric vehicle revolution. I don’t see as many Tesla employees wearing their Tesla gear like they used to, perhaps the drop in stock price humbled them.

        Tesla employees acted like they were God and they worked for the greatest company to ever exist. I see tech employees perhaps wear a company t-shirt or a company backpack, but Tesla employees took it to the next level: they wore Tesla belts, Tesla hats, Tesla backpacks, Tesla pants and Tesla t-shirts. The only thing they were missing were Tesla underwear, Tesla socks and Tesla shoes. Now they were not in between jobs, they were at the airport flying somewhere! They looked ridiculous but I guess when Tesla stock was at $300 a share and the media treats you as a god, I guess you will dress like Garth from the Reebok scene in Wayne’s World.

        I never had that kind of money so I do not know what it does to you.

        Remember, although de Haviland had the first jetliner with the Comet, it was the Boeing 707 and the Douglas DC-8 that ushered in the jet age when jetliner travel became safe, affordable and a key point: profitable for a business to operate jet aircraft for commercial travel.

        One thing I learned about inventions. One can come up with all sorts of cool ideas, but if the idea is not profitable it is not going to reach mass scale because no firms will have the incentive to put that idea into the marketplace.

        In other words, just because

        • Chicken says:

          Japanese are the epitome of gadgetry, you want to see the best mankind has to offer go to Yodobashi Camera in Tokyo Shinjuku Station.

        • MC says:

          What you are highlightning is what I call “The Apple Problem”, meaning the belief that a company with a hardly unique technology will somehow manage to repeat Apple’s performances over the past few years and have insanely high margins years in, years out.
          As far as we can see Apple was a freak one time occurrence whose days may be numbered before it becomes “just another company”.

          While I have nothing but respect and admiration for Dr Dre as businessman (despite cordially detesting his music), I have to give Ellon Musk credit on one thing: not only he created a cult Jim Jones would be proud of, but got the US government to generously subsidize it.
          There are presently 43 different models of fully electric passenger cars on the Chinese market, ranging in size from the big SUV to the small two seater. On top of these there are light trucks and delivery vans readily available. Most big manufacturers are selling electric cars in China: BMW, Daimler, Nissan, Toyota, Volkswagen etc.
          Yet investors somehow believe Tesla is “unique” and has access to some mysterious technology Daimler and BIAC engineers cannot understand.
          Differently from Apple, Tesla is hardly a profitable company. It promises to be so down the road, but the Chinese market gives us a glympse of the field Tesla will have to compete in a few years.

        • Tom Skowronski says:

          And the Boeing 707 was designed from the KC-135 tanker which was built by government contract. So, the Federal government you could say started the jet age!

  6. robt says:

    The dual-class share structure was always a favorite in Canada. Canadians love to sell something (especially 2nd generation family businesses) but still own it.

  7. Tom Kauser says:

    Risk continues to come off until stimulus is agreed upon

  8. nick kelly says:

    A couple of days ago I commented that in addition to the usual- you could add growing US political instability.
    Wow! The pot just got raised- all in.

    The realization that Trump’s ‘transition manager’ Rudy Guliani was bragging about an upcoming surprise for Clinton and admits he got this from FBI agents BEFORE the announcement, has blown this case wide open.
    A few days before all this I posted that Kellyanne Conway probably wished Rudy would go on safari, in Africa. How could such a wacky looking and sounding character be seen as an asset?

    Thankfully he didn’t and was around to point out a felony by who ever leaked it to him AND incriminate himself (misprision of felony)
    Just how stupid is this guy?
    At least Nixon THOUGHT his tapes were private.
    He didn’t come out and say in a TV address- ‘yes they were guilty but out of loyalty I felt I had to help them’
    If anyone thinks I’m exaggerating stay tuned.
    The last thing this big was Watergate.

    • CrazyCooter says:

      So, help me out here – the story is:

      (1) Hillary/Bill are being re-investigated, after 650k emails showed up on the laptop of a former Congressional rep who was sexting underage girls


      (2) someone leaked the story that there will be a re-investigation of Hillary/Bill a few days ahead of there officially being a re-investigation.

      Either way, the election (thank gawd) is over on Tuesday.



      • walter map says:

        “Either way, the election (thank gawd) is over on Tuesday.”

        Unless Trump loses. He was very clear on that point.

    • Chicken says:

      NYC Police department obtained the evidence, not the FBI. So it’s perfectly believable Guliani had word before the FBI was dragged back into it?

  9. nick kelly says:

    I’ll help you. The answer is (2)

    Bill and Hillary are always being investigated. That’s been going on for 30 years. So far they’ve sort of got Bill being naughty. See Jack the Zipper for Presidential Precedent.

    Re: the Clinton Foundation. There are two independent charity watchdogs. There are a LOT of flaky charities.
    Both give the Clinton Foundation not just outstanding marks- its payout ratio of 90 % is unheard of- putting to shame some well known TV fund raisers. No Clinton family member has ever taken a salary.

    The Trump Foundation we NOW find out is not even a registered charity!
    It’s been raising contributions illegally and has been issued a ‘cease’ order. Among its expenditures, a 6 ft high painting of Trump and hundreds of thousands in his legal bills.

    An FBI agent (not a someone!) leaking information to hurt one party’s candidate a few days before the election is a violation of the Hatch Act and a felony. This is not supposition. For some reason Giuliani TOLD us this.
    These are some of the differences between (1) and (2)

    • night-train says:

      Trump did say the election was rigged. I guess he knew what he was talking about for once, since his campaign did the rigging. Now, perhaps Hillary’s supporters should declare that they won’t accept the election results if Trump wins.

      The fallout from this election is going to be far reaching. We may have reached the point that as a country we have become ungovernable. Is democracy an experiment that has failed? Might it be time to reimagine what we are as a country? If we can’t move forward as more or less one people, should we consider becoming two countries? What was once unimaginable, may now be considered. The history of humankind is littered with failed civilizations. May be we are destined for a less glamorous fate than the one we have taken for granted.

      • walter map says:

        “If we can’t move forward as more or less one people, should we consider becoming two countries?”

        If you do that, who’s going to subsidize the red states?

        Have a heart. They might have their problems, but even the red states don’t deserve a Trump dictatorship.

      • Edward E says:

        Remember the good old days when Halloween was the scariest night of the year. Now it’s election night!

      • polecat says:

        Why leave it at two ??

      • walter map says:

        “The fallout from this election is going to be far reaching.”

        You could take that literally, given both major candidates’ views on thermonuclear devices.

        The U.S. could balkanize: Hawaiians and the Lakota want their countries back, Southerners are still fighting the Civil War and want to throw out the 13th Amendment, and the Baptists are itching for a Holy Texan Empire. But look at the bright side: all would repudiate the national debt, members of congress would have to get real jobs, and the national anthem would be replaced with something that isn’t a drinking song.

        • night-train says:

          Walter Map: I think you summed up our nation’s situation nicely. Sort of a state of the states assessment. And with a dash of humor added for spice. Good work.

    • walter map says:

      “The Trump Foundation we NOW find out is not even a registered charity!”

      Trump is the only beneficiary. So it’s still sort of a charity.

    • VK says:

      What Trump allegedly did was in a private capacity as a businessman.
      What Clinton did was in a public capacity as a first lady, senator and Secretary of State, she represents the American people. She is supposed to adhere to higher standards. Period.

      So far, HRC is the establishment’s war candidate. I have never seen such a media bias against any candidate, in the way DJT has had to endure. He is terrifying to the establishment’s grip on power. Not one major media outlet has endorsed him in a country where he has 45-50% support.


      The Brookings report — a year in the making — is due out in December.
      Taken together, the studies and reports call for more-aggressive American action to constrain Iran, rein in the chaos in the Middle East and check Russia in Europe.
      The studies, which reflect Clinton’s stated views, break most forcefully with Obama on Syria. Virtually all these efforts, including a report released Wednesday by the liberal Center for American Progress, call for stepped-up military action to deter President Bashar al-Assad’s regime and Russian forces in ­Syria.
      “You can’t pretend you can go to war against Assad and not go to war against the Russians,” said a senior administration official who is involved in Middle East policy and was granted anonymity to discuss internal White House deliberations.

      • NotSoSure says:

        Racism vs World War III. My choice is clear. Most people will survive the former and will definitely not survive the later. The easiest choice in a while.

        • Ben says:

          Hillary also has the backing of corporations and billionaires. Trump is self financed. Choosing someone who will work for the wealthy or for all of us makes an easy choice also.

        • night-train says:

          Answer to Ben: Donald Trump is not self-financed. He has loaned money to his campaign and is taking all the money he can get from his supporters. There is a huge difference in loaning money to your campaign and spending your own money.

        • Frank Udge says:

          Except those are suppositions based on air; Trump makes vague policy statements and HIllary names some names but neither has laid out a plan or a strategy. Hillary has to talk tough as a female Democrat, and Trump has to be a racist asshole to get votes from other racist assholes. It’s marketing, or Kayfabe if you follow wrestling. The deep state will continue to pursue its goals as will the multinationals, and both have complex strategies and agendas that are much harder to outline than our cartoonish electoral politics.

  10. walter map says:

    M&As and IPOs are God’s way of saying you should be a short-seller.

    • Wolf Richter says:

      I love that.

      But I did listen to that voice in November 1999. Never lost so much money so fast. I was a few months early. The voice had forgotten to tell me the correct date.

      • walter map says:

        I’m jealous. The voices never talk to me.

        • kitten lopez says:

          “I’m jealous. The voices never talk to me.”

          they can’t get a word in edge wise; you’re too hilarious.

      • bead says:

        I tried that, too, on a very small scale. I was naive enough to think nobody was watching. I think it was Brocade and it was certainly way overpriced but after some small success I went for an amazing ride and learned the meaning of “rinse job.” So I skittered back to my cage and prayed for forgiveness.

  11. Dan Romig says:

    Some times Acquisitions can be beneficial – to parties in the deal. When LCS bought out my family business, they acquired a vast amount of hard red spring wheat and spring by winter genetics that their European business did not have. Dad and I got paid well for our two decades’ work, and the combination of dad’s age and the technological advances (which we were not able to employ) made it time to sell.

    As a follow up from Merger-Mania-October from 1 November to Nick Kelly: Yes, Trigen Seed had a small laboratory scale crossing program of about 250 to 300 crosses per year. LCS has many thousands of crosses in both their spring wheat and winter wheat programs, and it is quite a large scale. Same for Syngenta, Monsanto, Bayer Crop Science and the Universities. Yes you can grow wheat in buckets!

    Of course, the goal is to have a superior variety that takes market share and is cultivated on as much acreage as you can sell/supply.

    I do agree with MC’s comment that CEOs are using cheap credit to ‘buy’ growth. As a trend, it is not a positive thing to have less competition and a few companies controlling markets. We see that in mass media here in the States.

    P.S. Nick, I too am a student of physics.

  12. Edward E says:

    Family may be driving Schneider IPO


    Wonder if they will back away from the big IPO plan?

  13. bead says:

    Don’t fight the Fed. I can’t wait until the next head fake in December. The important folks will be tipped off at lunch. The rest of us can just enjoy the heartburn. Small wonder Trump got traction; ever since the technocrats discovered how to “manage” “capitalism” most of us have been playthings for the gods.

  14. Kevin Carhart says:

    I recently read John Cassidy’s book Dot Con, and watched this fascinating 2002 Frontline about valuation fraud: https://www.youtube.com/watch?v=c4TlmkhE3Mw .
    Are the rules any different now? Could the uncanny and fast share price collapses be something similar between the investment banks, the bloviating analysts, the VCs, etc?

  15. chris Hauser says:

    i thought this was about IPOs.

    perhaps the one on 11-8 will be withdrawn.

Comments are closed.