Sunday, March 7, 2021

A theory about the current IPO market – TechCrunch

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As expected, shares of Poshmark exploded this morning, blasting over 130% higher in afternoon trading from the company’s above-range IPO price of $42. The enormous and noisy debut of Poshmark comes a day after Affirm, another IPO, was treated similarly by the public markets.

Both explosive debuts were preceded by huge December debuts from C3.ai, Doordash and Airbnb. It seems today that any venture-backed company that can claim some sort of tech mantle is being treated to a strong IPO pricing run and a huge first-day result.

This is, of course, annoying to some people. Namely, certain elements of the venture capital community who would prefer to keep all outsized gains in their own pockets. But, no matter. You might be wondering what is going on. Let’s talk about it.

Here’s how you get a big first-day IPO pop

TechCrunch has covered the IPO window as closely as we can over the last few years. And the late-stage venture capital markets, along with the changing value of tech stocks and the huge boom in consumer (retail) investing.

Based on my participation in as much of that reporting as I could take part in here’s how you get a 130% first-day IPO pop in a company that has actually been around long enough for investors to math-out reasonable growth and profit expectations for the future:

  1. Exist in a climate of near-zero interest rates. This leads to super-cheap money, bonds being shit and no one wanting to hold cash. Lots of dollars go into more speculative assets, like stocks. And lots of money goes into exotic investments, like venture capital funds.



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