We just got off the plane from a VERY long couple of weeks of client meetings plus the Pareto Offshore Conference over in Oslo, so forgive us if make this week a bit shorter than usual. While in the air, we got caught up with a ton of Substack reading, and one that caught our attention was from our good friend Paulo Macro. Paulo’s post caught a trend we’ve noted here a few times, and as recently as last week – “ton of supply hitting the market (~$4.5B raised this week) as the IPO window remains open. And similar to IPO, companies are hammering the market with supply with 30 secondaries and $9B raised…” The window is wide open and bankers/PE/insiders are scrambling to shove paper down the market’s throat. They’ve already placed 156 IPOs for ~$30B YTD, up 56% YoY, and while not quite 2021, it’s on pace for the second seat…
But what happens when the supply of paper begins to overwhelm the demand for new issue? When the IPO pop isn’t sustained and deals begin to break pricing?? What happens when the window slams closed? And what happens when all the insiders/PE shares unlock? We traded this theme in the early 2000s and 2020s and is one of the reasons we track Unlocks and Completed IPOs (and Busted IPOs) at KEDM both as a broad topping indicator and for idiosyncratic trades. Go take a look at the old clip where Max and I dive into the topic (click here) and our old KEDM whitepaper (click here).
Over to Paulo – “The signs that an IPO window may be closing have demonstrated a consistent pattern over the decades, and because these are infrequent periods, they always catch my attention. Any significant throttling back of ECM performance is usually a strong late-cycle signal that broader markets are about to turn down, especially if too much supply of paper has overwhelmed demand in the primary markets for IPOs.
IPOs are beginning to break deal price. Summer vintages are fading as ECMs need to make room in their books for new issues. I believe the IPO window is closing fast. Whether or not this means the market tops out now or in a few weeks remains to be seen, but unless the market can shake this off quickly as “just another mid-cycle indigestion,” these new issues are a big red flag for me in the eventual rollover to come in US equities. Just like 2021. And just like 2000.”
Paulo walks through the history a bit deeper with some charts, so I urge you to scroll through his post (click here). It isn’t perfect but something to monitor as a late-cycle indicator. High profile IPOs are fading left and right and the window will close. When these start losing their bid it can be like shooting fish in a barrel…
Kuppy’s Event Driven Monitor (“KEDM”) is not a financial or investment advisor and the information contained in this publication is not intended to constitute legal, accounting, or text advice or individually-tailored investment advice and is not designed to meet your personal financial situation. The investments discussed in this publication may not be suitable for you. You are required to conduct your own due diligence, analyses, draw your own conclusions, and make your own investment decisions. Any areas concerning legal, accounting, or tax advice or individually-tailored investment advice should be referred to your lawyers, accountants, tax advisors, investment advisers, or other professionals registered or otherwise authorized to provide such advice. KEDM makes no recommendations whatsoever regarding buying, selling, or holding a specified security, a class of securities, or the securities of a class of issuers, and all commentary is for educational purposes only. The investment examples noted are intended to provide and example of the events and data KEDM flags each week and is not representative of typical returns generated by each event or any future returns.
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When The Window Closes…
A low frequency but juicy strategy where the edge is government incompetence.
Let’s dig in…
We just got off the plane from a VERY long couple of weeks of client meetings plus the Pareto Offshore Conference over in Oslo, so forgive us if make this week a bit shorter than usual. While in the air, we got caught up with a ton of Substack reading, and one that caught our attention was from our good friend Paulo Macro. Paulo’s post caught a trend we’ve noted here a few times, and as recently as last week – “ton of supply hitting the market (~$4.5B raised this week) as the IPO window remains open. And similar to IPO, companies are hammering the market with supply with 30 secondaries and $9B raised…” The window is wide open and bankers/PE/insiders are scrambling to shove paper down the market’s throat. They’ve already placed 156 IPOs for ~$30B YTD, up 56% YoY, and while not quite 2021, it’s on pace for the second seat…
Now sprinkle in the treasury secondaries that clock in at another ~$31B in H1 with most of it placed in Q2 alone. The crypto industry “has never seen this level of public company activity ever…”
But what happens when the supply of paper begins to overwhelm the demand for new issue? When the IPO pop isn’t sustained and deals begin to break pricing?? What happens when the window slams closed? And what happens when all the insiders/PE shares unlock? We traded this theme in the early 2000s and 2020s and is one of the reasons we track Unlocks and Completed IPOs (and Busted IPOs) at KEDM both as a broad topping indicator and for idiosyncratic trades. Go take a look at the old clip where Max and I dive into the topic (click here) and our old KEDM whitepaper (click here).
Over to Paulo – “The signs that an IPO window may be closing have demonstrated a consistent pattern over the decades, and because these are infrequent periods, they always catch my attention. Any significant throttling back of ECM performance is usually a strong late-cycle signal that broader markets are about to turn down, especially if too much supply of paper has overwhelmed demand in the primary markets for IPOs.
IPOs are beginning to break deal price. Summer vintages are fading as ECMs need to make room in their books for new issues. I believe the IPO window is closing fast. Whether or not this means the market tops out now or in a few weeks remains to be seen, but unless the market can shake this off quickly as “just another mid-cycle indigestion,” these new issues are a big red flag for me in the eventual rollover to come in US equities. Just like 2021. And just like 2000.”
Paulo walks through the history a bit deeper with some charts, so I urge you to scroll through his post (click here). It isn’t perfect but something to monitor as a late-cycle indicator. High profile IPOs are fading left and right and the window will close. When these start losing their bid it can be like shooting fish in a barrel…
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Kuppy’s Event Driven Monitor (“KEDM”) is not a financial or investment advisor and the information contained in this publication is not intended to constitute legal, accounting, or text advice or individually-tailored investment advice and is not designed to meet your personal financial situation. The investments discussed in this publication may not be suitable for you. You are required to conduct your own due diligence, analyses, draw your own conclusions, and make your own investment decisions. Any areas concerning legal, accounting, or tax advice or individually-tailored investment advice should be referred to your lawyers, accountants, tax advisors, investment advisers, or other professionals registered or otherwise authorized to provide such advice. KEDM makes no recommendations whatsoever regarding buying, selling, or holding a specified security, a class of securities, or the securities of a class of issuers, and all commentary is for educational purposes only. The investment examples noted are intended to provide and example of the events and data KEDM flags each week and is not representative of typical returns generated by each event or any future returns.