IPOs: Boom or Bust?
In just the first five months of the year, over 470 companies have gone public in the U.S.
That’s almost as many as the 480 U.S. initial public offerings (IPOs) that happened in all of 2020.
This rise of IPOs isn’t new, though. The hype over potential quick profits has fueled bandwagon investors to snap up shares of these brand-new companies.
But if you’re looking to get rich quick on IPOs, think again. Some of the most highly anticipated IPOs are tanking in the markets right now…
3 Headlines for the Week:
The IPO Bubble Looks Ready to Pop
Takeaway: The markets have been volatile to kick off the summer. This is usually when many financial professionals begin their yearly vacations. And tech stocks have taken a beating from the sell-offs. Cloud-based data company Snowflake is no exception…
While its stock has rebounded a bit, it’s still down about 46% from its all-time highs just six months ago. And remember, Snowflake was the largest software IPO ever. It even doubled on its first day of trading last September. Yet investors who bought it then would be sitting on losses of about 13% today.
Takeaway: Vacation rental company Airbnb has about 20% of the U.S. lodging market. That’s almost as much as the top five hotel brands combined. But it hasn’t been immune to the effects of the pandemic, when fewer people are traveling.
Despite the COVID-19 headwinds, the company announced on its earnings call this week that it managed to grow first-quarter revenues by 5%. And management has a positive outlook ahead for growth as places reopen and travel restrictions are lifted. However, this wasn’t enough to impress investors.
Shares fell on the news. Once one of the most hyped IPO stocks of 2020, Airbnb is now trading just around its debut price. And it’s down nearly 35% from its highs in February.
Takeaway: Cryptocurrency exchange Coinbase had all eyes on it when it had its IPO last month. Its listing was a major milestone for the crypto industry. And in its first-ever earnings call, it reported quarterly profits jumped to $771 million from just $32 million.
But while crypto fans initially helped Coinbase’s stock soar in its debut, that hype hasn’t lived up in the longer run. It’s down about 24% in the one month that shares have been trading.
These three companies tell a cautionary tale that we’ve been warning you about for months…
1 Way to Profit:
The Better Special Situations to Invest In
Just like cryptos and meme stocks, highly anticipated IPOs aren’t a guarantee of good results or quick profits. A company needs to have a strong foundation first.
Adding in a special situation just gives you a bonus tailwind for the stock price to shoot up double or triple digits in a shorter time frame. (And remember, hype isn’t a special situation.)
It’s a simple approach that Wall Street legend Charles Mizrahi follows to find the best special-situation stocks in the market.
I work closely with Charles to bring the latest opportunities he’s seeing to readers like you. So, I see how he puts his nearly 40 years of investing experience to work all the time.
And when it comes to special situations, he always looks for innovative leaders in growing industries that go on to dominate their markets.
In fact, he’s already researching his next special-situation opportunity. Once it’s ready, he’ll be sending it to readers of his Lifetime Profits research service right away.
Charles dedicates the Lifetime Profits model portfolio to special-situation stocks. And you won’t want to miss out on a stock that could hand you potential triple-digit gains in about a year or less.
1 Question for You:
Have You Been Swayed by Hype?
We’re all human. It’s easy to get caught up in headlines and let emotions influence our investing. I’m guilty of it myself.
Have you been swayed by the hype around cryptos, meme stocks or IPOs? How have you kept a level head and avoided the bandwagon?
To take my attention off of the mainstream media, I like to hike on nature trails or spend time social distancing with close friends.
Let me know how you unplug and avoid the headlines by writing in at AmericanInvestor@BanyanHill.com.
Senior Managing Editor, American Investor Today