IPOs Are All Pumped Up

FxPremiere.com — Telegram FX signals | Investors have had plenty of reason to think that stock valuations have become detached from reality this year – and the reasons just keep coming.

The market for initial public offerings is still running ridiculously hot, especially in the U.S. and China, where retail investors, in particular, are piling into new offerings with little thought for traditional valuations.

Last week’s debuts by home rental company Airbnb (NASDAQ:ABNB) and food delivery group DoorDash (NYSE:DASH) set new standards for an exuberance for loss-making technology stocks not seen since 1999. While they’ve come off a little this week, DoorDash still trades nearly 60% above the IPO price and even further above the price that bankers – not generally known for under-selling their products – thought advisable. AirBnB, for its part, closed on Monday nearly 100% above its IPO price.

Stocks Hit Limit Up

Even in a year full of magical thinking about stocks with a growth narrative, these two stood out. Neither is profitable, although DoorDash did eke out a small profit of $23 million.

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As recently as April, AirBnB had had to raise $2 billion fresh capital at a reported valuation of only $18 billion. At the end of its first day of trading, it was valued at $86.5 billion. us index

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The contradiction implied in the blowout performance of both companies is stark: DoorDash’s business has been accelerated by a pandemic that has forced restaurants to close and deliver their meals if they want to stay afloat. Covid has been good for it. By logical extension, when restaurants reopen their doors again, DoorDash’s growth will falter.

So while it’s possible to make a case for one or the other having a blowout, it’s really hard to see how two blowouts can be explained, except by irrational exuberance.

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It’s not just in the U.S. that performance has been startling. China’s stock market bears many of the same hallmarks – including a headlong rush by retail investors into new stocks that has pumped the Chinext growth index up more than 22% from its pre-pandemic levels;

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IPOs Are All Pumped Up

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IPOs Are All Pumped Up

IPOs Are All Pumped Up | us dollar index