Hot IPO's Are All The Rage, Warning Sign Or Better Times Ahead?
This morning, the hot initial public offering (IPO) that opened for trading on the New York Stock Exchange was King Digital Entertainment plc (NYSE:KING). This company is in the mobile gaming space and almost everything in technology sector has been rallying over the past few years. So it is understandable why the banking would price the offering at the high end. The IPO was priced at $22.50 a share, but the stock is now trading around $20.45 a share which is about 9.0 percent lower than the offering price. It is safe to say that some shareholders are not too happy right now. At this time, this IPO can be considered a flop, but the coming days will tell us much more.
As many of you know, there is a long list of high flying companies that are looking to come public over the next few months. Most of these companies do not make any money currently, but the stock market has been on fire so it makes sense for these companies to try and go public. In the past, when this type of IPO euphoria has occurred it was always a warning sign of a stock market that was filled with hot money looking to put in something. Just look back at 1999, and 2007, companies were becoming public by the minute hoping to cash in. Does anyone remember when the popular private equity firm Blackstone Group L.P. (NYSE:BX) rushed its IPO out in the public market in June 2007? That so-called hot IPO flopped and signaled a top in the stock market. As you might know, the stock market topped out on October 7, 2007 which was just four months after the Blackstone IPO.
Some companies that are looking to become public soon include Grubhub Inc (NYSE:GRB), Tarena Intl Inc ClA ADR (NASDAQ:TEDU), 2U Inc (NASDAQ:TWOU), Rubicon Project Inc (NYSE:RBU), and Aerohive Networks Inc (NYSE:HIVE). Many of these stocks mentioned are in the cloud computing space, but there are many more potential IPO's in other sectors that are looking to come public very soon. If history has taught us anything, these so-called hot IPO's could be warning us that this stock market is frothy at best and possibly warning us of some sort of top in the stock markets.