Markets

The IPO Market Is Dead

By John Del Vecchio  |  October 2, 2019

It’s official. The IPO market is dead. For now, at least.

The year has been full of overhyped stock clunkers coming to market. Combine that with the warning signs I discussed last week about weakness in corporate buybacks, the stock market is tired.

It’s long in the tooth.

It’s overvalued.

It needs a big breather.

Of course, insiders know this. That’s why insider sales are at a seven-year high. They aren’t dummies. They know their companies better than anyone else. If patsies in the stock market are going to give them a bird in the hand by bidding up stocks to overvalued levels, insiders will take that gift and sell with reckless abandon.

After all, a lot of insiders’ wealth is tied to the price of their company’s stock.

Back to the IPO market.

Lackluster IPOs of 2019

Past cycles that had the market flush with billion-dollar IPOs signaled a top. Recently, we had Peloton Interactive (Nasdaq: PTON) and SmileDirectClub (Nasdaq: SDC) go public.

Peloton stock is peddling backwards. The company went public at $29 a share. A few days later, it fell to under $25 before settling in a bit.

Smile Direct Club has been all frowns. It’s a stock with no teeth. The stock priced at $23, only to open down $3. It continued to slide even more. Now the stock is under $14. It’s one of the worst IPOs of 2019, and the one of the worst debuts of unicorn stocks with billion-dollar valuations.

Uber (NYSE: UBER) and LYFT (Nasdaq: LYFT) have both crashed into a wall. Both stocks have imploded with no floor in sight.

Investors have pricked Pinterest (NYSE: PINS) and that stock has also deflated.

One of the only bright spots among high-profile IPOs has been Beyond Meat (Nasdaq: BYND). Even this stock has been roasted over the last six weeks as it fallen to about $145 from $235. While there’s been some good news for the company lately, and clearly there’s demand for its products, one can’t ignore that a secondary offering took the shine off the stock.

It reeks of management treating shareholders as suckers.

It’s so bad the WeWork scrapped their IPO plans all together. There was so much self-dealing on the part of the CEO he was sacked from his job.

These IPOs are a sucker market. Combined with companies hitting the pause button on buybacks, you’re going to have to find opportunities in hidden corners of the market.

A Stock Under the Radar

One of this month’s recommendations in Hidden Profits is in one of those nooks and crannies.

It’s a company that is commercializing a patented technology to make the world a safer place. That’s a bit more noble than shared office space or self-driving taxis. Yet few people know the story.

It’s a stock flying under the radar.

If you’re a subscriber to Hidden Profits, I can’t wait to reveal it to you in the next couple of weeks.

If you’re not a subscriber, you have time to jump in on a risk-free trial of Hidden Profits before the release of the recommendation.

In the meantime, batten down the hatched and avoid all of these over-hyped “unicorns” helmed by Steve Jobs wannabe’s with inflated valuations and little path to profitability.

Your brokerage account will thank you for it.

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John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Fortunes newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR