Airbnb (ABNB-US) doubled its share price on its first day of trading and its market value once exceeded $1,000.00. Doordash (DASH-US) also rose 80% on its listing day, making shareholders’ pockets full and raising concerns about whether the history of the 2000 dot-com bubble will return.
According to Jay Ritter, an IPO expert and professor of finance at the University of Florida, today’s IPO market is not as frenzied as it was in 1999-2000, but it is indeed an extremely crazy period in history. The current climate reminds him of the time when dot-com stocks were out of touch with the market: their valuations soared to the sky and were ultimately unsustainable.
According to Ritter’s history of U.S. IPOs from the 1980s to the present, the average first-day payout of IPOs this year was 37%, the highest in 2000, and this year is still lower than the 56% in 2000, and only half of the 1999 payout.
This year to December 9, a total of 153 IPO cases, by the annualized calculation of 162 cases a year, less than in 2004 and 2014, but higher than the average of the past 20 years.
In addition, Ritter said IPO fundraising reached $58.7 billion during the same period, the highest since 2000 ($64.8 billion), where the total does not include the number of special purpose acquisition companies (SPAC, also known as blank check companies) this year.
Average first-day compensation and total number of IPOs in the U.S. IPO deals.
Ritter said over-valuation doesn’t mean a company is bad, but it may not be a good investment, “We’re seeing a similar disconnect today… Some public companies are overvalued and there’s not much upside for investors anymore.
He believes that the hot IPO market does not necessarily mean that the broader U.S. stock market will be in danger, but it can be inferred that value stocks will outperform growth stocks, that is, a repeat of the history of the Internet bubble two years later. Recalling the heyday of the dot-com bubble in March 2000 until the bottom of the bear market in 2002, the S&P 500 index plunged nearly 50%, but many value stocks rose sharply during the same period.
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