8 Apr 2021
Market Metrics: US IPO
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
We have seen many financial market crashes first hand during the past three decades with the two biggest being the 2000 Tech Wreck (Dot-com Bubble) and the 2008 Global Financial Crisis (GFC).
Both destroyed billions of dollars of investor capital and for both the IPO (Initial Public Offering) dollars which refers to the process of offering shares of a private company to the public to raise capital using a public exchange peaked in the year prior.
The amount raised in US IPO market peaked in 1999, it peaked in 2007 and in 2020 it went berserk at US$154 (AU$202) billion dollars raised.
Click for chart 1.
What has been the driver (the fuel)? Low interest rates.
The lack of return from cash, term deposits, notes, bills and bonds has fuel investment in tech companies especially which are now as sector valued at even higher multiples than in 2000 Tech Wreck (Dot-com Bubble).
Click for chart 2.
Yes, we keep getting reports and research that 2021 is going to be a good year but there is no doubt that tech sector valuation are beyond stretched.
Something will go wrong which is why it is most important to remain invested according to your appetite for volatility and when fear and panic take hold during the next financial catastrophe, only then react by buying more quality assets at discounted prices.
At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.
