Huge Red Flag - More Share Issuances
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The red flags get redder. Last week we wrote of Meta and Google’s equity issuances and how that would be a headwind for stock returns.
This week we add Super Micro (SMCI) and Oracle (ORCL) to the list of issuers needing to finance their AI buildouts. Both stocks tanked on their respective announcements. It seems that corporates are eager to cash in on euphoric market sentiment to fill meaningful gaps in their financing plans.
We raise the concern because there were large share issuances by tech/internet companies during the dot-com bubble as well. These were a defining feature of the mania. The heaviest flow came right around the peak in early 2000.
During that time, IPOs also exploded as hundreds of internet companies went public with little to no profits, revenues, or even finished products. In 1999 alone there were 476 IPOs, followed by 380 in 2000. Average first-day pops were enormous, often 100% or more.
We are starting to get into a similar dynamic as SpaceX IPO’d on Friday at over $2T valuation. The largest IPO ever and the 6th largest publicly traded US company on day one. Pretty soon we will be getting Anthropic and OpenAI IPOs at similarly eye-popping figures.
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