Stock investors are welcoming money-losing companies into the public markets this year with open arms.
About 83% of U.S.-listed initial public offerings in 2018’s first three quarters involve companies that lost money in the 12 months leading up to their debut, according to data compiled by University of Florida finance professor Jay Ritter. That is the highest proportion on record, according to Mr. Ritter, an IPO expert whose data goes back to 1980.
IPO Market Has Never Been This Forgiving to Money-Losing Firms
Money-losing companies are going public at a record rate as investors hunger for new issues
The Nasdaq Composite is set to finish higher for the 9th consecutive quarter when exchanges close this Friday, September 28th. (With a QTD gain of more than 6%, it would take a dramatic plunge over the next two trading days for the quarter to end in the red.)
Below is a chart showing streaks of quarterly gains for the Nasdaq Composite since its inception in 1971.
Nine quarters of gains is not quite the longest streak on record, and it’s not even the longest streak of the last six years! The longest stretch of quarterly gains made it to ten from Q1 2013 through Q2 2015. Prior to that, the record was 8 quarters back in the mid-1990s (Q1 1995 through Q4 1996). Not even during the Dot Com boom of the late 1990s did we see such consistency of gains for the Nasdaq.
While the Nasdaq has been more consistent to the upside during this bull market than it was during its epic late-1990s rally, the size of the quarterly gains seen this time around don’t come close to matching the rallies seen back then. In the chart below, we show the quarterly price change for the Nasdaq going back to 1971. Yes, we’ve seen very nice quarterly gains of 5-10% many times during the current bull, but from 1997 through Q1 2000, the Nasdaq posted seven double-digit quarterly percentage gains, including a gain of 29.5% in Q4 1998 and a ridiculous 48.2% gain in Q4 1999. This period is nothing like the 1990s.
1.Emerging Markets Valuation Vs. S&P Back to 2004 Levels.
Emerging Markets: This chart shows the overall EM trailing price-to-earnings ratio vs. the S&P 500 (LTM = “last 12 months”). EM stocks haven’t been this undervalued relative to the US in quite a while.