Daily Management Review

What Is Happening With Hi-Tech IPO Market?


US high-tech sector is no longer entering the market. There have been no IPO in January, which was a kind of anti-record in recent years.

Last time, only 2011 passed without tech IPO in the beginning of the year. This data are given by Renaissance Capital, a management company, engaged in just public offering.

Well, it seems that the situation with the public offering in this sector will not improve in the near future. Reuters has reported that the dynamics of high-tech companies during past few weeks suggests that expectations of any progress in the spring may be unfounded.

Reuters has quoted Eric Jensen, an IPO lawyer at Cooley LLP, who says that the company has a fairly tight schedule. There are approximately 32 companies planning to enter the market in the foreseeable future, yet IPOs of five companies with a market capitalization of about $ 1 billion stalled.

Thus, given that capitalization of the tech sector companies has heavily subsided, new companies will be able to attract limited amount of funds even in the case of entering the market. It turns out that these companies have moderate appetites: cut costs, set aside their ambitious expansion plans and even lay off staff.

However, all may change if the financial markets will be stabilized. It is hard to predict whether it will happen or not, but almost every year we witness inflating some stories, which lead to easy panic in the markets. Very often, the source of the tension comes from Europe. Last year it was the sell-off in the bond market, and then the Greek saga. This year, however, there is a lot more reasons: the European banks, the slowdown of China's economy, the Bank of Japan's weakness and collapse of oil prices. In addition, Fed’s rates are no longer at zero this year.

Over the past few trading sessions, the S&P 500 index of wide market still managed to win back some losses, but so far it is nothing more than a correction, and we can still see much lower levels.

One of the most successful hedge funds - Third Point - notes in its letter to investors that the beginning of the year occurred to be a very negative for the stock markets in general and the US financial sector in particular. CEO of Third Point said that given the collapse of stocks showed up at the beginning of 2016, we could talk about the "recession on Wall Street."

At the same time, some analysts believe that a significant reduction in stock indices generally does not reflect real depth of the collapse occurred, especially considering wide range of S&P index companies, which suffered serious losses. In some cases, these losses can mean not temporary, but long-term decrease in capitalization.

source: bloomberg.com

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