Dearth of IPOs Could Be a Bullish Sign

No, really. When was the last time you saw an IPO in the wild? or in captivity?

According to the Standard & Poor’s it has been almost 3 months since we had an IPO. Unless I’m mistaken, that would be Rackspace (RAX) a internet hosting company which has seen its share fall almost 60% (from the offer price of $12.50).

This is nearly as bad as things got in early 2003. You remember that dark hour in market history, don’t you?

But the IPO freeze isn’t limited to the US. Over in Europe the same thing has taken hold. Not only are IPOs completely on hold, but any financial dealing, including mergers, acquisitions, buybacks, etc. are similarly shelved. This can’t be good news for financial firms who are grappling with the most intense crisis we’ve ever seen. It is as if all the taps were turned off instantly.

Or for their employees. Time to brush up on the resume or gasp, consider grad school

Usually a dry period in IPOs is bullish because it indicates that prices are too cheap. But right now we are not seeing a normal cyclical turn of the markets. This is very unusual because if it were a matter of stocks being cheap, so many firms would not be canceling buybacks as well. Obviously things are so bad everyone is getting in a fetal position and hoarding cash.

Either this is extremely bullish or the momentary suspension in the air before we plunge to zero. Your pick.

Comments

[Jackson Cash:]

z-z-z-z-z-z

2008 Oct 24 10:21 AM

[romang:]

This is a double edged sword. It can mean that the worst is over. But it also mean that company's that need capital are unable to get it. But, I am with you hopefully this is a bullish sign.

2008 Oct 24 11:55 AM

[Muzie:]

Just buy the good stuff in this crappy market and you'll be fine. Should beat buying the good stuff in a good market any day of the week instead we get some relief.

2008 Nov 13 08:37 PM