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The soaring valuations handed out to newly public companies in the initial public offering boom has led some to believe there s an IPO bubble. One part of this potential bubble is the rise in special purpose acquisition companies or SPACs.
More than half of the IPOs in 2020 were done through SPACs, which are blank check companies created to merge with another firm, taking it public in the process. So is the current market sustainable, or is there indeed a bubble that will pop at some point?
Many hedge funds have written about the SPAC tend in their recent letters to investors, but most of them are bullish. Sabrepoint has taken a contrarian view, as portfolio manager George Baxter believes there is a bubble. He said in the fund s fourth-quarter letter that they re finding many short opportunities in SPACs.
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Companies such as Airbnb are better established than those that soared in the bubble two decades ago. Courtesy of Airbnb
Are we having another tech-stock bubble? It’s not hard to see why people are worried about that possibility.
Last week’s initial public offerings for DoorDash (ticker: DASH), Airbnb (ABNB) and C3.ai (AI) appeared positively out of control, with huge post-listing gains for all three. The sell-off that has followed over the past few trading days smacks of buyers’ remorse.
There are huge differences, though, between today’s market and the internet-bubble years of two decades ago. In 1999, for instance, the top 10 first-day pops were all more than 350%. And many of those companies had shaky foundations.
Fears over tech bubble after Airbnb’s mammoth $100bn Wall Street debut
The warning comes after Airbnb shares more than doubled in their trading debut on Thursday
12 December 2020 • 6:00am
Lofty valuations for tech companies are leading the industry into bubble territory not seen since the late 1990s, experts have claimed.
The warning comes after Airbnb shares more than doubled in their trading debut on Thursday, propelling the home-rental company to about a $100bn (£75.7bn) valuation in one of the biggest first-day rallies on record.
In the same week, food delivery company Doordash’s market debut saw its shares soar to $189 in New York on Wednesday after being priced at just $102 a day earlier. The surge valued the company at $72bn, twice the market cap of Barclays.
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