🔬The IPO Window Is Open, So Where Are All The IPOs?
🔬The IPO Window Is Open, So Where Are All The IPOs?
Plus: Biden's 2025 budget (and deficit) revealed; Saudi Aramco is much less profitable (too sad); Garbage crypto is on a roll; and much more.
"In bear markets, stocks return to their rightful owners"
- J.P. Morgan
"When I had money everyone called me brother"
- Polish proverb
The big US markets were down smalls on a very slow news day (S&P 500 -0.1%, Nasdaq -0.4%).
5 of 11 sectors closed higher, led by Materials (+1.1%) and Energy (+1.0%). Worst were Industrials, Real Estate and Consumer Discretionary (all -0.5%)
Another silly day for Bitcoin and Ethereum (both around +6%).
Meta flopped -4.4% after Trump’s critique, calling it "enemy of the people".
Covid vax maker Moderna was up +8.7%, primarily due to positive Biden connection from State of the Union: "The vaccine that saved us from COVID is - are now being used to beat cancer."
Street Stories
IPO Update
With big name IPOs for Reddit and Astera Labs expected next week, I thought I’d do a bit of an update on the state of US IPOs (don’t worry I’ll be brief since there hasn’t been much to talk about in years).
If you’ve been reading StreetSmarts, you’ll know I was pretty negative about companies trying to hammer through IPOs last year but it seems like conditions are actually perfect right now to list (for the company at least, if not the investors). So, with things on the up-and-up since the ‘Peak Fed’ narrative picked up steam in October, why haven’t we seen one big market debutant ball? Good question.
Explainer: It can take years for companies to get all the IPO paperwork sorted - especially for bigger IPOs. So while the ‘IPO Window’ has feasibly been open for ~3-months now, that’s probably not long enough for most companies on the fence to get their s*** together. Moreover, the expectation for much of the last two years was that we’d be in a recession by now, so a lot of companies have pre-emptively completed private financing rounds to tide them over.
So there may not be a big rush at the moment but - assuming the window doesn’t close due to the economy or stock market blowing up - then it’s fair to expect IPO activity to continue to pick-up from the record lows of the last three years.
Biden's Budget: A Trillion-Dollar Tango with Taxes
The White House released the President’s proposed $7.3 trillion budget for the 2025 fiscal year, aiming to improve the economy by increasing taxes on corporations and the wealthy, with a corporate income tax rate hike to 28% and a minimum 25% income tax on those with wealth over $100 million. However, the proposal faces opposition from Republicans, including House Speaker Mike Johnson, who criticizes it for promoting excessive spending and lack of fiscal discipline. For example, the budget estimates that the fiscal deficit will be $1.78 trillion in the 2025 fiscal year (6.1% of GDP), a decrease from a projected 6.6% in 2024.
(Click here for the full press release from the White House.)
Saudi Aramco’s Profit Drops (boo woo)
When the semi State-owned, world leader in oil drilling reported their Q4 the other day, earnings per share came in ~25% lower in 2023 than 2022. OPEC+ production cuts and lower crude prices have reduced profitability, with the Street forecasting pretty flat profitability growth through 2024.
As you can see below, Aramco shares can almost be used as a proxy for the price of Brent Crude at this point.
Anywhoo, don’t feel too bad for Aramco, as it managed to pay out $97.8 billion in dividends in 2023 (up 30% from 2022), with 98% of that of course going to the Saudi Government so they can buy more sports teams/players/leagues or do stupid megaprojects.
Alt-Coins Go Crazy
Bitcoin and Ethereum finished civilized trading hours with both up ~6%. That’s nothing new anymore. What is interesting is that all the shi…err, ‘Alt-Coins’ have started to make some aggressive gains. You know it’s ‘Risk On’ when POOH Coin explodes almost 200%.
Joke Of The Day
Three econometricians went out hunting and came across a large deer. The first econometrician fired but missed by a meter to the left. The second econometrician fired but missed by a meter to the right. The third econometrician didn’t fire but shouted in triumph, “We got it! We got it!”
Hot Headlines
CNBC / Reddit targets valuation of close to $6.5 billion in upcoming IPO. Company expects to sell ~22 million shares in the $31-$34 range, in what will be this year’s first major IPO and the first social media one since Pinterest in 2019.
Wall Street consensus is mixed. Wall Street Bets consensus is universally negative.
Reuters / Oil prices stall after funds complete short covering from hedge funds and asset managers wind down. Outstanding shorts were reduced to just 28 million barrels down from a high of 128 million barrels on December 12. That’s a lotta dinosaur bones.
Yahoo Finance / US leads global oil production for sixth straight year. The U.S. Energy Information Agency says it averaged 12.9 million barrels per day (bpd). For context, Saudi Arabia has a maximum capacity of 12 million bpd.
Reuters / Choice Hotels surrenders its $7 billion hostile takeover attempt of rival chain Wyndham after weak shareholder support. Good to know luxury American brands Days Inn and Ramada are safe now from the clutches of Radisson and Comfort Inn. Ha.
Quartz / A Tesla Cybertruck owner tried to find out just how bulletproof it is. Apparently not very. Shocker.
Trivia
This week’s trivia is on the Dot-Com Bubble.
What was the peak of the NASDAQ Composite Index before the dot-com bubble burst? (For context, it’s ~16,000 right now)
A) 3,000 points
B) 5,050 points
C) 7,000 points
D) 10,050 points
Which company's IPO is often cited as a symbol of the dot-com bubble's excess?
A) Amazon.com
B) Pets.com
C) eBay
D) Google
What was the typical percentage of ownership retail investors had in tech stocks at the peak of the bubble?
A) 20%
B) 75%
C) 50%
D) 90%
How much did the NASDAQ Composite Index fall from its peak in March 2000 to its low in October 2002?
A) 50%
B) 78%
C) 65%
D) 85%
(answers at bottom)
Market Movers
Winners!
EchoStar (SATS) [+10.7%] CONX Corp agreement to buy subsidiary real estate for $26.75M.
STAAR Surgical (STAA) [+8.1%] Upgraded to buy by Stifel, highlighting 1Q24 sales potential and low share price risk.
Choice Hotels International (CHH) [+5.6%] Hostile takeover of Wyndham is called off; director nominations withdrawn.
PHINIA (PHIN) [+5.2%] Morgan Stanley starts at overweight, noting strong valuation and capex strategy; sees prolonged cash flow from internal combustion market.
Duolingo (DUOL) [+4.3%] JP Morgan rates overweight; emphasizes market leadership, freemium model, and product innovation focus.
MicroStrategy (MSTR) [+4.1%] Purchased 12,000 bitcoins with ~$820M cash, as reported in 8-K.
Losers!
EQT Corp (EQT) [-7.8%] Acquiring ETRN for ~$5.5B or $12.50/share, a 12% premium; deal set for Q4 closure.
Triumph Group (TGI) [-4.5%] Reaffirmed Q4 revenue outlook below consensus; FY cash-flow guidance cut after Product Support business sale.
Meta Platforms (META) [-4.4%] Fell after ex-President Trump's critique, calling it "enemy of the people"; mentioned TikTok ban would favor Facebook.
Boeing (BA) [-3.1%] Under scrutiny as US Justice Department probes January Alaska Airlines incident; recent 787 technical event injured 50; multiple emergency events reported.
Market Update
Trivia Answers
B) The Nasdaq peaked at 5,048 points before the bubble burst. It took more than 14 years to get back to a new all-time high.
B) Pets.com. Such a hilarious story.
B) 75%. Everyone became a day trader back then.
B) The Nasdaq crumbled 78% from its 2000 peak.
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