Isn't the market what determines the value of a company? If they can't get the IPO price they want, then they aren't worth what they think they are.
The VC fund in the article is basically saying "We believe that anyone buying late-stage startups at these valuations is a fool and is unlikely to get a better price when it goes to the public markets, and we are not going to be the greater fool with your money."
The whole VC/startup grift needs the greater fool to be either a big company with money to burn to do an acquisition, or the retail investor to be the greater fool via IPO.
This is bad.
Of course someone could say "well they're not forcing you to buy the IPO'd stock!", and that's sort of true, but only in the strictest sense. My 401k, like I think nearly everyone's, is a mutual fund, and it invests in a little of everything. I also buy ETFs that do the same thing, because it's really the only way to preserve wealth, for better or worse. Even if I, for example, thought that WeWork's business model was unsustainable, I don't really have a way of "opting out" of buying their stock without effectively starting my own index fund, or having my cash lose value in an FDIC savings account.
I have a lot of VTI stock right now, which if I understand correctly invests in basically everything in the America stock exchanges, though I guess an argument could be made that I should have known that dumb companies being included in there was always a risk.
Still, I don't have to like it, and I do think that a lot of these companies IPOing when they don't really have any way of actually making money is an issue waiting to happen.
Hold it for 10-30 years and it’ll be up and to the right. On average 10% gains in a year, though like anything it always fluctuates
I agree it's a good investment for long-term stuff, it's the fund that I recommend to everyone.
Personally I feel like it's a bigger issue for individual investors that in recent years companies now IPO only in later stages or not at all and that much of the more profitable bits of the growth curve are now accessible only to the private markets.
From a VC perspective, you can exit as other funds rebalance into the stock at the inflated valuation.
Some other approaches:
* Buy long-dated put options for companies you think are overvalued, so your overall portfolio (retirement account+personal trading account) has 0 exposure to stocks you don't like. If a stock's price goes down, exercise the option before its expiration date and profit.
* Assemble a portfolio of sector ETFs and exclude the tech sector. Or buy regional ETFs in regions with low tech exposure. (If you're American, I recommend buying ex-America ETFs for hedging purposes anyways, since your career already gives you significant exposure to the American economy.)
Granted, you will be paying higher fees with these approaches, but given how dominant tech stocks are, if you really believe they are significantly overvalued, I think you should be willing to pay those higher fees.
You are not going to make much shorting in general unless you have a nose for identifying the next Theranos et al.
Every 401k has multiple fund choices, so pick one that does not invest in recent IPOs.
In fact this should be very easy because most funds don't participate in recent IPOs! Depending on the 401k, you might not even have any fund that invest in recent IPOs.
I've done that, out of necessity -- the US IRS hates foreign ETFs, and I live out of the US.
Market movers are almost certainly a Parato 80/20 thing, and most of the growth of the stock market, or even the S&P, is in a handful of companies.
Find the prospectus of any local Index funds and then start looking at their top 50 picks; cross reference that with a few others. Pull the 20 that stand out the most.
It's just general market conditions. Once interest rates fall, tech VC will go right back to the grift.
Biotech has also seen a major slowdown this year too, despite the huge $43b, $14b, $10.8b, $10b, $8.7b, $7b and $7b [1] acquisitions last year and all the usual IPOs. It's just interest rates catching up to everyone's funds.
[1] Seagen, Karuna Therapeutics, Prometheus Biosciences, Immunogen, Cerevel Therapeutics, Reata Pharmaceuticals, Mirati Therapeutics
But the U.S. population has to want it rather than voting emotionally again.
> But the U.S. population has to want it rather than voting emotionally again.
Why would the US population want:
>> The whole VC/startup grift needs the greater fool to be either a big company with money to burn to do an acquisition, or the retail investor to be the greater fool via IPO.
? IMHO those greater fool-based moneymaking schemes can go die in a fire.
>>> The whole VC/startup grift needs the greater fool to be either a big company with money to burn to do an acquisition, or the retail investor to be the greater fool via IPO.
I was the one that originally wrote that. Bear with me for a second.
I avoid working for startups, but the VC/startup grift indirectly benefits me, as they soak a bunch of software developers from the market at large, increasing demand and salaries across the board. I call it a grift out of sincerity, but I was never hypocritical to pretend I didn't benefit from it.
As for the general population is hard to say. The layoffs that affected tech reached way beyond cushy software engineer jobs.
We may recognize that building castles on sand is a bad idea. Perhaps our economies, and the rules that create incentives (perverse or otherwise) should be different than they are.
Fact is, we have a lot of fucking castles built on sand right now. If they crumble, a lot of people will be left to wander among the rubble.
I do hold a deep despise for the billionaire class that was the ultimate beneficiary of this whole "building castles on sand" activity. It's not them who will lose the most when everything crumbles though.
I get that, we as software engineers have indirectly benefited from the scam.
> As for the general population is hard to say. The layoffs that affected tech reached way beyond cushy software engineer jobs.
I don't think it's hard to say. If the general population was made understood the full situation, they'd tell us software engineers to get lost along with the billionaire VCs, because the general population are the ultimate greater fools that pay for it all (either directly through the stock market, or indirectly through the businesses who make so much through monopoly off of them that they can easily afford to be greater fools).
We software engineers have had a pretty privileged time while a lot of people have been struggling (viz. the whole "learn to code" bandwagon from a few years ago).
Nonetheless, I don't think you are wrong. I'll just point out that the monopolies you refer to, and the billionaires that ultimately benefit from it exist due to policies and laws that directly benefit them so they achieve that very position.
I don't deny that we lived though a privileged time - I was perhaps lucky that I had aptitude and interest in coding right at the time when the profession was on the rise.
While some may be deeply concerned about AI taking jobs (which I think is complete bullshit), my main concern is a shift in economic conditions that will severely reduce demand for developers due to less money moving around the sector.
I believe the the ones that will suffer the most are the newcomers. Either recent graduates that are coming to the market at the worst possible time, or those that switched professions very recently only to find the promised land had withered before they arrived.
Oh well. Time will tell.
Yes, it wasn't pushed by software developers, but it wasn't some fake thing either. The main driver was the anxiety and stress a lot of people have about their economic situation. Software development was seen as one of the few achievable "good" job as precarity crept into many previously stable types of employment. The "parties interested in flooding the field with newcomers" just took advantage of the situation.
Where? I wouldn't be surprised if deflation becomes a real concern in the near future. Eurozone is already at 1.8% YoY
Unemployment has bottomed out again at 4%.
The stock market has been making all time highs.
The fed is lowering rates.
None of these measures says anything about human health or anything other than the fact of dollars exchanging hands
Egyptian, roman, French etc… slave colonies probably had the best economic productivity on the planet. Who cares?
My House has a public valuation, but the value it me is much higher, so It is not for sale.
Im sure there are several things that you dont buy for their market price because they have less value to you. You dont go into the store and buy every Item you see, or put every item you own for sale.
With all that said, my point was to highlight the role of choice in deciding to sell or not. I wouldn't recommend selling your car if you owe more than the market price, and don't have money for a replacement.
11.129B market cap.
There's an appetite for companies with low profitability, but promising future growth.
In theory, the market will bounce back so IPOing now is effectively selling low.
Sort of? You're describing either a healthy business, at which point their market value shouldn't be an issue, or management holding the business hostage because they prefer their salary to shareholders having a return.
Now the only options are to either cash out at a lower valuation and not make any money, or wait and hope the business grows to the point where you can get a higher total valuation despite the lower multiple and see a return on your capital.
But Ive been fed that the principal agent solution of equity and executive privilege prevents this! Next you'll tell me capitalism doesn't allocate resources efficiently.
This phrase is distilled nonsense. Executive privilege [1] has precisely nothing to do with the principal-agent problem [2].
[1] https://en.wikipedia.org/wiki/Executive_privilege
[2] https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
There are several markets involved here.
> then they aren't worth what they think they are.
Which is an indication that your market is corrupt or lacks the information discovery necessary for accurate pricing information to be generally available.
FOMO and free cash can work like magic for all kinds of assets.
They did this to avoid any changes to their sky high valuation, as if they went and fundraiser it would have tanked it.
At this point I think they’re hoping to meander along until they’re forced into fire sale or they get acquired for their customer base
If interested, look up "Valuation: Measuring and Managing the Value of Companies"