The chart below can be downloaded here.
More than 75% of the companies that made initial public offerings in 2017 were losing money at the time of their listing – the highest percentage since the peak of the Dot-Com bubble in 2000. Looking at this year, IPO activity jumped in Q1 with 43 companies collectively raising almost $16 billion. This represented a nearly 50% increase relative to Q4. 2018 has also seen a number of billion-dollar-plus IPOs, including the April direct listing of Spotify (which also loses money).
We believe this trend of looking to public markets to fund the operations of businesses that do not generate any earnings while oftentimes providing exit liquidity to early private market investors speaks to the general risk-seeking environment of today. We also wonder how sustainable this trend is, especially if rates continue to rise.
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