Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
This year has seen the busiest U.S. IPO market since 2007, with 199 companies already going public.
Their performance has investors fearing we've hit IPO market bubble territory.
Of the year's 199 IPOs, 23% priced above their initial IPO ranges.
Through the first two weeks of November, 16 companies have doubled their initial public offering price. Six companies doubled their IPO price on the first day of trading alone.
Even in the worst month of the year (April) for IPOs, companies still posted an average gain of 13.6% on their first day of trading.
But the bulk of the "bubble" talk is fueled by the soaring valuations of this year's tech IPOs…
The Tech IPO Market of 2013
Obviously there was a frenzy around Twitter Inc. (Nasdaq: TWTR), which opened at $45.10 per share – 73% higher than its offering price of $26. And that first-day surge occurred despite the fact that Twitter actually lost $133.9 million during the first nine months of 2013. That was up from a $70.7 million loss in the same time frame in 2012.
Now it looks like a slew of optimistic tech companies are ready to make a public leap in 2014. Companies like Spotify, Uber, Pinterest, and Box are rumored to all be eyeing initial public offerings – even without strong financials to support their valuations.
Pinterest, for example, is yet to make a profit, but still raised $225 million last month at a valuation of $3.8 billion.
Those high valuations based almost entirely on potential are why many are on the IPO market bubble watch.
But we're not quite there…
Quality Control in IPO Market
"Tech IPOs have not even come close to entering 'bubble' levels," Money Morning's Defense and Tech Specialist Michael Robinson told his Strategic Tech Investor subscribers Friday. "Yes, the average year-to-date gain for a tech IPO is 60%. But that average also includes biotech stocks and is less than twice the overall market's 31% gain."