Nasdaq, “Tech,” & IPOs are in for Gut-Wrencher

Nasdaq down 24% already. Renaissance IPO ETF down 31%. But Uber and other unicorns are planning record IPOs in 2019, à la dotcom-crash-debut in 2000.

The IPO hype machine has produced some very successful companies and a lot of spectacular wealth transfers from the hapless public to early investors selling their shares. Here are two of the standouts that I covered:

Snap [SNAP], purveyor of the Snapchat app and must-have sunglasses with a built-in camera: Shares peaked at $29 on the second day after its IPO, given it a market capitalization of $32 billion. Shares closed on Friday at $4.96 and this morning trade at $5.24, down 82% from day two of trading.

Blue Apron [APRN], the cream of the crop of about 150 VC-funded meal-kit startups founded over the past five years, was valued at $2 billion during its last round of funding in June 2015 when it was one of the most hyped unicorns that would change the world. Then enthusiasm began to sag. By the time the IPO approached, the IPO price was cut from a range of $15-$17 a share to $10 a share. Shares closed on Friday at $0.68 and are trading this morning at $0.71, down 93% from its IPO price.

But not all IPOs are “tech” companies – though there’s nothing “tech” about a meal-kit maker other than the least important part, the app. The Renaissance IPO ETF [IPO] holds the shares of companies across the board that went public over the past two years. After two years, the companies are removed from the ETF. Its top five holdings are in real estate, insurance products, music streaming, and cable TV, so not exactly pushing the boundaries of tech invention.

These five IPOs haven’t done all that badly, compared to the wholesale destruction of Blue Apron, though they all have dropped sharply from their recent peaks (prices as of this morning):

  1. Vici Properties [VICI], a casino property company, at $18.02, is down 22% from its peak in January 2018 shortly after the IPO.
  2. Athene Holding [ATH] – a “retirement services company that issues, reinsures and acquires retirement savings products” – at $38.36, has dropped 29% since September, 2018.
  3. Invitation Homes [INVH], Blackstone’s buy-to-rent creature that acquired over 48,000 single-family homes out of foreclosure at the end of the housing bust, at $19.40, is down 18% from its peak in September.
  4. Spotify [SPOT], the music streaming service, at $107.46, has plunged 46% from its peak on July 26. It went public in April.
  5. Altice USA [ATUS], a cable TV operator, at $15.37, is down 39% from the peak on the day after its IPO in July 2017.

Overall, the Renaissance IPO ETF has plunged 31% from its peak in June 2018 (data via

The Nasdaq itself has dropped 24% from its all-time peak at the end of August.

It is in this new reality that some of the biggest startups and some of the biggest money-losers in the startup circus are trying to unload the shares to the public in 2019 before the “window” closes. The enormous hype about these IPOs has already started, with bankers funneling this hype to the Wall Street Journal, which breathlessly reported on the big numbers to be transferred from the public to the selling insiders and the companies. The hyped numbers are truly huge.

The biggest candidates that are that are now being hyped for an IPO in 2019 are:

Uber, with a current “valuation” of $76-billion, could go for an IPO in early 2019 that would value it at “as much as $120 billion,” the WSJ reported, based on the hype the bankers are now spreading to maximize their bonuses. Not all shares would be sold in the IPO, so the proceeds in this scenario could reach “as much as $25 billion.”

Palantir (data mining), with a current valuation of $20 billion, could see an IPO valuation of $41 billion, according to the WSJ’s “people familiar with its plans,” who also cautioned that these plans remained in flux, and that, according to the WSJ, “investment bankers often exaggerate projected IPO values to win business.”

Lyft, with a current valuation of $15 billion, is also looking for an IPO in early 2019, at “more than $15 billion.”

Then there is a gaggle of other big startups that could also head for the IPO window in 2019, according to the WSJ’s “people familiar with the matter,” but apparently haven’t decided on the timing yet. They include:

  • Ant Financial Services Group (current valuation of $150 billion), formerly known as Alipay, an Alibaba creation. Alibaba’s shares have plunged 36% since June.
  • Didi Chuxing (current valuation of $56 billion), the Chinese ride-hailing outfit.
  • Airbnb (current valuation of $31 billion).
  • Pinterest (current valuation of $12 billion).
  • Slack (current valuation of $7 billion), which sells cloud-based collaboration tools.
  • “A raft of smaller but closely watched companies,” such as food-delivery service Postmates, security firms CrowdStrike and Cloudflare, and videoconferencing-software provider Zoom Video Communications.

The all-time high that “tech” IPOs combined raised in a single year was $44.5 billion. If these tech IPOs come to pass in 2019, and if these valuations can be pulled off, with Uber alone hoping to raise $25 billion, the 2000-record would be broken by a large amount.

That would make sense: The year 2000 was when the dotcom bubble began to collapse catastrophically, and everyone tried to get their heroes out the IPO window before it would close for years to come. The Nasdaq, where these IPOs were concentrated, would eventually crash 78% from its peak in March 2000, with catastrophic consequences for those who’d bought the hype.

The WSJ muses about this new generation of record-setting IPOs and Wall Street bankers’ hype machine:

For average investors, it could mean they finally will be able to bet on companies like Uber that have become part of their everyday lives but have been out of reach, even as their estimated values ballooned.

When all IPOs are included, and not just “tech” IPOs, 2018 was a banner year, with $54 billion raised. This includes 47 tech companies that raised only about $18 billion – a far cry from the $44.5 billion that tech IPOs raised in 2000. But 2019 is going to fix this shortcoming, assuming that the hype works and that the public is buying.

The WSJ, citing Dealogic, pointed out that tech IPOs this year on average soared 28% on the first day of trading. No word about what happened afterwards. But the Renaissance IPO ETF is down 31% so far this year. Reality starts after the first few days of trading.

Tech companies that had already gone public raised an additional $21 billion in 2018 by selling more shares to the public in follow-on offerings, the most for follow-on offerings since 2000.

Then, the WSJ tucked this reality-infested warning into its last paragraph:

In another sign of exuberance, investors are overlooking lofty valuations and measly — or zero — profits to have a shot at outsized returns. In the first three quarters of the year, four-fifths of all U.S.-listed IPOs were of companies that lost money in the 12 prior months…. That is the highest proportion on record.

So the last three months of 2018 plus 2019 and perhaps years to come are shaping up to be, by the looks of it, a similarly glorious period for tech stocks, IPOs, and the Nasdaq as the period from March 2000 till late 2002.

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  71 comments for “Nasdaq, “Tech,” & IPOs are in for Gut-Wrencher

  1. Wolf Richter says:

    Dear Readers,

    I and our contributors here wish you a Merry Christmas and happy holidays.

    • OutLookingIn says:

      The Ghost of Christmas Past.

      Junk Bonds.
      Pensions reaching for yield.
      Between 2006 & 2017 Kentucky’s bond portfolio has grown
      from 1% junk bonds to now 53% junk!
      What could go wrong? Right? If you are planning an imminent
      retirement, make sure you have the wear-with-all now.

    • Suzie Alcatrez says:

      Happy Holidays to all!

    • Damir Korac says:

      Merry Christmas, Wolf
      Thanks for your insights.

    • MCH says:

      Merry Xmas, Wolf, and may all 2019 IPOs bring you triple digit returns.

    • Dale says:

      Merry Christmas and Best Wishes for the New Year to all!

    • earl d. says:

      Thanks for all your great work! Even when I disagree with Wolfstreet’s analysis (Wolf or the the other contributors), it always provides a welcome counterpoint to the notorious market cheer-leading of the financial press.

      Also, a thank you to many of the commenters on the site. Contrarian/bear blogs frequently bring out the cranks, malcontents and outright mentally ill. And while not all commenters are completely devoid of crankiness, the over-all quality is high and I’ve frequently leaned something new or have been pointed to Internet resources I wasn’t aware of.

    • NotMyPresident says:

      Happy holidays to you too Wolf. Thanks again for all the great insights and hard dose of reality that is so lacking elsewhere. All of you…keep up the great work! :-)

    • pat-trick says:

      And may the “fOrCe” be with you(all) !

    • Mark Yu says:

      Merry Christmas!

    • polecat says:

      A Happy Happy to you and yours, Wolf. ‘:]

      … And keep swingin those gnarly antlers in the pursuit of truth & transparency !

    • Tonyrank says:

      Merry Christmas Wolf. Thank you for the news dark and bright.

    • NotBuying says:

      Merry Christmas wolf!

  2. Indian Reader says:

    Merry Christmas Wolf. Thank you for the awesome job you do. As a long time lurker (I have read your book with the Japanese girlfriend!), I have enjoyed your musings. God bless!

  3. CRD says:

    Can’t help but think that, unless there’s a dramatic and long-lived rebound, Uber et. al. will find that they pushed their IPOs out too far.

  4. MITCH says:


    • Rowen says:

      blast from the past!

      • MITCH says:

        LDDS…. Good memory Rowen ! CMGI and LDDS should have provided lessons for generations of market investors, but… goes to show you that most of the commenters here are young. You tend to remember that whip stinging your backside, haha !!

      • MITCH says:

        i guess that was not the way to post a chart…. anyway…transports have broken down.. Richard Russell is screaming from his grave…SELLLLLLL !!!!

      • earl d. says:

        The above might be a hideously ugly URL. But if you copy-and-paste it into your browser, it brings up the chart perfectly.

      • Rowen says:

        All i want for Christmas are puts. I think the massive rallies are gone for a while. We’re in run-off mode.

  5. Javert Chip says:

    Most of the companies you discuss are exactly the kind of tinder that needs to be clear from the capitalist forest (unicorn poop?).

    Average (aka look-up-comments-on-internet-savy as opposed to financially savy) investors can’t read financial statements (some fool will shortly be along to point out all financial statements are frauds), yet they consider themselves diviners of the next tech/IPO success.

    Imagine that: guys who literally can’t read the financial statements actually consider themselves fantastic venture capitalists.

    On another topic, technology seems to accelerate most everything, and I suppose this applies to the proverbial “IPO window”…this next few months could be filled with pass-the-popcorn moments.

    • Could you recommend a good resource for learning how to read financial statements?

      • Javert Chip says:

        A vary fair but challenging request:

        The one, single question an investor tries to answer is “Am I comfortable enough with this management team to give them my money so they can make more money for me? You do not have to be smarter than the CFO or the world’s best accountant. The learning process has 2 macro components:

        1) (20% of effort) Learn the composition, relationship and function of the Income, Balance and Cash-Flow statements. “READING FINANCIAL REPORTS FOR DUMMIES” (yes, that’s the exact name of the book) is a reasonable start. You’ll learn generic financial lingo and how to “read” the reports in a couple of weeks (competency grows with experience). At all points in time, remember the one, single question you’re trying to answer, and DO NOT try to become an accountant in a couple of weeks.

        2) (80% of effort) This part is trickier. Novice investors may be startled to realize there simply is no such thing as a completely accurate financial statement for a multi-billion-dollar global company with hundreds of offices, hundreds of product lines, and thousands of employees. HOWEVER, TRENDS FROM YEAR TO YEAR ARE CRITICAL. The issue is “management judgements” are required to establish the market value of significant parts of the business. For example, in a bank, “management judgements” are required to value the loan portfolio, loss reserves & write-offs, as well as reserves for legal settlements, fines & fees. These represent huge components of the value of the bank; there certainly are Generally Accepted Accounting Principles (GAAP) that guide this valuation, but there is no exact science that objectively produces the “correct” number; every bank literally does it differently (this is usually somewhat disclosed in the innumerable footnotes to the hundred or so tables & exhibits). Additionally, numbers, risks and currency conversion factors change on a daily basis.

        Pick a fairly simple target-firm (Starbucks?), get their most recent annual report (contains 5-years of history for all 3 financial statements) and use your generic understanding of financial statements to begin analyzing your target-firm (How did the firm change from last year? Is the firm doing a better/worse job of collecting money owed to it? Are revenues growing faster than expenses?). A more in-depth understanding requires learning the lingo of the firm’s industry (yes, each industry is somewhat different, and, of course, industries change over time).

        Look at multiple years of your firm’s performance side-by-side, focusing on areas of significant change. I always start (and finish) with target-firm cash-flow. Using a medium-sized bank as an example, I’d focus on loan composition (auto, mortgage, HELOC, credit card, commercial; local, regional, national), loan quality, loss reserves and write-offs. Changes in these valuations flow thru all 3 statements.

        One word of caution: annual reports also include the current year’s “Letter from the Chairman”: this is always an absolutely amazingly statement of how well the company did this past year, and how glorious next year will be. Nobody ever just says “we really screwed the pooch this year, but we’re thinking of taking your money and giving it another shot next year”. This is your management team talking to you, it’s worth paying attention, but remain appropriately skeptical.

  6. Rowen says:

    The defensive stocks got taken out today. Utilities, consumer staples, MIC, etc.

    Oil got hammered (hard to tell why because both the supply and demand curves have shifted in opposite directions).

    This is not a correction.
    This is a repricing of everything (except cash and cash-equivalents).

  7. Tinky says:

    Thanks Wolf! All the best to you and your family for the holidays, and what is likely to prove to be a very interesting New Year, and the same to the many knowledgeable contributors to this fine blog,

  8. APM says:

    Thanks Wolf. Wish you and your loved ones a merry Christmas and happy New year!

    I’m a recent subscriber to your site and love your insights.

  9. raxadian says:

    Merry Christmas.

    So… how many unicorns will die just after the holiday season?

  10. Charlie says:

    Reminds me of a Dilbert clip of financial advisor talking to client:

    Financial Advisor:
    Convertible notes, preferred stock, municipal bonds, covered call options…(add IPO’s)
    These are things you never hope to understand, so trust me and try to forget that my only career ambition is to drain your account like a giant mosquito.

    That sounds reasonable.

    Financial Advisor:
    I’m always surprised at how easy this is.

    Merry Christmas, Wolf
    Thanks for your insights.

  11. Paulo says:

    Thanks Wolf for your insights, good cheer, and mandated posting decorum. Well done this year. All the best to other readers and may the weather forces be kind over the holidays. We just spent two days cleaning up after a vicious windstorm toppled some trees at our place. Our house survived, but a hen house did not as a 100 foot cedar won that battle. We now have power back plus internet, and are most thankful for our modern comforts including a hot shower!!

    Many readers (including myself) have felt the Market was ripe going on rotten. New IPOs? Really? I think many investors have forgotten there are no sure bets in life. 2019 looks very …………

    • OutLookingIn says:

      “2019 looks very’…………
      Would the word be… Inauspicious?

      We experienced the same wind storm down here in the little islands.
      Power still out in some locations, with road closures from downed trees.
      Generator performed up to spec, as did the heat-a-lator fire place insert. So we past the raging storm in good stead.
      Not so with most folks, as the fast approaching financial storm will sink some and seriously damage held wealth values of many more.
      Have a safe and happy holiday season.
      Now to bring in more firewood. phew!

    • Wolf Richter says:

      Sorry to hear about the storm, and the damage it has done to your property. Glad to hear everyone is OK. That’s the most important thing. All the best.

    • nick kelly says:

      Went into the 49 th Parallel grocery near Nanaimo (on VI) on the 23 th;
      All meat and frozen stuff gone.
      Don’t know whether they shipped it or what but they lost power so ..,

  12. Bill from Australia says:

    Your last paragraph said with tongue firmly in cheek ( I hope ) must be removed if you want to eat some Christmas Pud ,well said Sir

  13. Art says:

    This really takes me back to 2000, working at a startup in Jack London square, right at the beginning of the end of bubble 1.0. History is always repeating, we never learn.

  14. Dick says:

    Thanks, Wolf and Merry Christmas to you and your family. I’ve been suspecting that the fabulous growths watered by ZIRP would shortly die off. I just looked at Netflix: a billion dollar cash burn every year. Yikes!

    Also a recent subscriber and love your site. Keep up the good work.

  15. TXRancher says:

    Special Merry Christmas Wolf and all great commenters!

    Wolf your small Christmas gift is in the donation box.

    And special Merry Christmas to RD Blakeslee, brother from a different mother.

  16. Jack says:

    Merry Christmas and happy new year Mr Wolf,Family and all the generous contributors to this awesome site.

    “ The Pass the popcorn “ comment here holds so much prospects for indeed a very
    “ Entertaining “ year ahead :)

  17. HowNow says:

    Thanks, Wolf. Great articles, contributors, readership. Happy Holidays…

  18. Dale says:

    Invitation Homes! How wonderful to hear about it. I’ve been collecting a dossier of the REO to Rental companies. Curiously, none of those who are public (and therefore report) have ever had non-negative earnings. What a wonderful investment!

    At the time of their formation, every knowledgeable insider said that it was impossible to profitably manage disparate properties in various geographic regions. And they were right!

    But, as it turned out, these companies were able to jack up rental rates and property values. Which I suspect — and per Ben Bernanke — is exactly why they were created.

  19. michael says:

    The only thing I want for Christmas is these IPO’s to go to zero. Merry Christmas and a happy new year to all.

    • Escher says:

      The ones who will suffer the most if Uber and Lyft IPOs were to go belly up will be the drivers who are barely able to make a living as is.
      The company top brass will make out just fine.

      • Guido says:

        What is the IP that only Uber and lyft have that other companies cannot replicate? An app? Better for the market to be fragmented so that the drivers get a chance to pick and choose whom they contract with. Sure the so called sifting value (sifting drivers and passengers) won’t be there, but hey if those traits were so great unsuspecting women wouldn’t be getting raped in Uber cars. So I say, good riddance to these companies that are now throwing in a billion a day into their valuations simply because their VCs feel like it.

        • Nicko2 says:

          As with all these types of companies, the value is the metadata gathered from billions of customers…and the AI algorithms to exploit them.

  20. Sporkfed says:

    Thanks for the good work Wolf. I hope this next year turns out to be boring but I think it’s just coming to a boil. Enjoy you Christmas.

  21. Bet says:


    Cuban actually may have been spot on
    About two years he predicting that it was going to be the private vc who was going to take big hits on the unicorns. Their best hopes now are to ipo to unload on the
    Ever needed muppets. I think the window maybe closed soon

    I know some people close to me who are in terrible pain from this correction so far and it’s not over. Their retirement is counting on stocks to keep levitating. It’s sad all over again and again and again

    My New Years wish? To see some one in finance wearing orange and cuff links

  22. Bernadette says:

    Merry Christmas (from Bali, Indonesia) with Peace with Loving Kindness Always to you and your beloved family, your behind the scene team members and to your amazing subscribers, Wolff!

    Bring 2019 On!

  23. KPL says:

    Merry Christmas and Happy New Year to Wolf and readers!

  24. Setarcos says:

    All the best Christmas and holiday wishes to everyone. Thanks Wolf for all the great work.

  25. Bobber says:

    I’ve never bought IPO stock and never will. The persons most knowledgeable about the business are on the other side of the transaction, and they are selling out. That’s all you need to know.

    Happy Holidays to All.

    • Guido says:

      Don’t worry. They’ll work their way into the index like Facebook did and then your 401k will own it one way or another.

  26. ML says:

    Often I do not understand what you and others are talking about – your articles are US-centric after all and even the articles about other countries except UK are beyond me. But I do enjoy reading the words and thank you very much for all the time skill and effort you give to provide a fascinating commentary on the downside.

    Wishing you Wolf and your other contributers a Merry Christmas today and a Happy and Healthy New Year. Thank you.

  27. OutLookingIn says:

    Another shoe dropped.

    The Japanese Nikkei has crashed 1,000 points!
    Has now tumbled into a bear market.

    The Wall street markets breakdown has turned out to be contagious.
    The contagion is now spreading around the globes markets.

    Look out below.

  28. Stuart Brown says:

    Aston Martin IPO from October this year fascinates me. 35% down already, with a profit that if using USA accounting standards I understand would not even exist. Something to do with not booking R&D as an expense?

    Going forward into a likely recession, every new and existing car has to be a sales success, plus a new factory to get on stream etc and so on.

    Will be surprised if ends well.

  29. Iamafan says:

    Wolf, Happy holidays and the best to your great blog. And to all of us who lost money during Christmas, remember it’s only money. Enjoy the holidays with your family and loved ones. Peace.

  30. Gene says:

    Those who have not sold have not lost money. However, I am surprised that this is the worst December since 1931, and the worst Christmas Eve ever.
    Compare the DJIA now to what it was two years ago, a little above 18,000 (granted, the composition has changed; Walgreens is now an “industrial”). I never thought the rise to 26,000 was justified. Now it’s retreated to sub-22,000, due to a variety of reasons. I wish the Fed could get away from QEs, QTs, leave the Funds Rate at something neutral – and be done with it.
    Remember the lyrics to the old Kenny Rogers song, “Never count your money while you’re sitting at the table.”

  31. Bet says:

    Yes. Yes ,you have lost money. By that logic if it’s only a paper loss then you never ever had any gains. It’s only on paper, right? Wallstreet has retail all brainwashed. You can’t pick a top. You can’t pick a bottom. All not true . It’s only a loss if you sell. Blah blah They love that. You hold while they dump. Use the IBD method then. An 8% loss. Sell. Then you sleep at night and have the buying power to get the bargains . It amazes me that so many don’t work just a little bit to educate themselves on the one thing they will depend on in later life
    I don’t mean to be snarky. Right now I am getting a lot of feedback from people I care about who are scared and are in pain and the only tool they have now is hope. Deer in headlights.
    You have agency Stop listening to wallstreet Protect your profits

  32. Shawn says:

    I’m going to hold out for the first trillion dollar unicorn.

  33. Bobber says:

    The stock market drop over the last three months was probably the most telegraphed and expected stock drop ever. First, the valuation levels were the worst in history by most metrics, so people knew the market was running on borrowed time. Second, we were headed into October, which has always been a weak month when the big drops occur. Third, the dispersion was clearly evident. Fourth, we were in the middle of tightening cycle with both QT and interest rate increases. The picture doesn’t get any clearer than that.

    The problem is that the Fed had conditioned people to speculate like there’s no tomorrow and never see any downsides. Everybody became dependent on the Fed, and they thought the Fed would support markets no matter what.

    Wolf was the only one that interpreted the Fed’s real intentions correctly. Nobody believed the Fed had any spine left.

  34. Laughing Eagle says:

    The first time I heard about Blue Apron I said it would never last. And I agrued with my family millenials about it, and they thought it was going to last and be a great benefit.
    Most IPO’s today are Wall Street hype dreams to get the illusioned to buy in. But after living about 7 decades you can smell a Wall Street sucker bet.
    Anyone thinking Wall Street today is the pathway to retirement is in for a long ride.

    Thanks Wolf for all your commentary and may 2019 provide you with even more success.

Comments are closed.