This summer is set to give us the biggest IPO wave we've ever seen. That's excellent news for the market overall - IPOs pull money into stocks and move prices higher - and it's really good news for one company specifically, that has a hand in a lot of these new firms...
According to research firm Datalogic (which has data going back to 1995), last year was the biggest summer to-date for IPOs. IPOs launching in June through August raised $32 billion.
But this year's summer months are set to eclipse those numbers. According to bankers that spoke anonymously to The Wall Street Journal, these new IPOs could raise a total of $40 billion.
IPO bankers are busier than they've ever been as companies like trading app Robinhood, Uber-competitor Didi Chuxing, and even Krispy Kreme are all set to go public.
Now, most of you know I generally tell retail investors to avoid IPOs at the open, and I stand by that.
But I've identified a unique leader with a deep expertise in financing Silicon Valley startups that later go public.
We're talking 30,000 pre-IPO firms to date with more on the way - and the company just reported a 293% earnings gain.
This could be the single best way to get a piece of the $40 billion IPO summer...
The Best Way to Play Future IPOs
Trading IPOs in the early days, particularly on the first day of trading, usually offers more risk than reward. Stocks are typically volatile in the early days of going public. They often drop sharply after the lockup period expires in six months and insiders can sell their shares.
For example, six months after going public in May 2012, Facebook Inc. (NASDAQ: FB) was trading for half of its $38 IPO price. Alibaba Holding Ltd. (NYSE: BABA) stock was trading below its IPO price of $68 a year after going public.
But things are different for those early investors, those who were in long before the IPO, who bought at pennies on the dollar.
Of course, finding the companies that can pay out 10 times or more over the next few years instead of crashing is easier said than done. I'll spare you the details right now, but you can click here to see how to maximize your chances of amazing success with pre-IPO investing.
Today, I'm looking at who's making money on the companies that go public. One company in particular has financed 30,000 startups, including some very famous ones like Airbnb Inc. (NASDAQ: ABNB), Pinterest Inc. (NYSE: PINS), Cloudera Inc. (NYSE: CLDR), and Ziprecruiter Inc. (NYSE: ZIP).
In fact, 68% of all tech and life-science companies that went public via IPO in 2019 and had venture capital backing worked with this company.
And in the first quarter of 2021 alone, the company made $364 million in warrant and stock gains as its startup clients went public through IPOs and SPACs.
Buying this stock means you can get the rewards tied to successful IPOs, while limiting the risk.
The Startup Bank: A Perfect Connection
The name? SVB Financial Group (NASDAQ: SIVB).
"SVB" stands for, you guessed it, "Silicon Valley Bank." Other than lending to Silicon Valley startups, SVB also helps startups with banking and connects them to venture capital investors.
SVB is the perfect play on a summer of startups going public. The bank is the source of a lot of the money and connections behind the lucrative startup scene in America, especially in tech and the life sciences.
SVB also counts those venture capital and private equity firms as clients, too, and offers private banking services for the Bay Area millionaires behind many of the most successful startups in the country.
SVB lends money to startups, runs their bank accounts, puts them in touch with the venture capital companies that invest in early-stage startups, and also runs the banking for those venture capital companies.
In fact, SVB even lends and invests in the venture capital companies themselves, so it profits from every stage of the startup process.
In fact, SVB's venture capital investment arm, SVB Capital, has $6.4 billion in assets under management, including venture capital legend Sequoia Capital.
Sequoia has invested in well over 1,000 startups over the years, including such success stories as Apple Inc. (AAPL), Alphabet Inc. (NASDAQ: GOOGL), Nvidia Corp. (NASDAQ: NVDA), PayPal Inc. (NASDAQ: PYPL), LinkedIn, YouTube, and Instagram.
With SVB investing in, lending to, and connecting startups with Sequoia, the synergy here is clear. And the good times have already started for SVB...
A Head Start
The bank's first quarter was its best ever, with earnings surging 293% from a year ago and every part of its business growing.
No wonder the stock has gone on a tear and is up 150% in the past year. But I still see a lot of upside ahead for both the bank's stock and earnings.
Given its earnings, I project that its profits per share will grow 28% a year. That means it should double in 2.5 years.
SVB is clearly a great way to build wealth for the long haul with a short-term boost likely in this summer's IPO craze.
And there's the added bonus of knowing you're getting in on a steady stream of great innovation.
No doubt this stock will be a potential high-growth engine for tech investors, but tech is a "big tent" investing discipline, and I think investors would do well to consider everything tech has to offer - cybersecurity, robotics, AI, the blockchain, and 5G. In fact, the nationwide 5G rollout has played a part in creating what I call a "5G Aftershock" market that's expected to grow 70% a year - more than double the rate of 5G itself. In my view, the magnitude of this technology's impact could rival the Internet itself - and here you can get the chance to learn about five companies that could profit the most.
Follow Money Morning on Facebook and Twitter.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.
Or to contact Money Morning Customer Service, click here.