Massive IPO supply pressures tech equities
The guest argues that an unprecedented wave of mega-IPOs and secondary offerings is forcing institutional investors to liquidate liquid mega-cap tech stocks to raise cash, creating a major market overhang.
The argument
Larry McDonald notes that upcoming raises from SpaceX, Google, Anthropic, and OpenAI total $150B-$200B immediately, with trillions more in insider capital unlocking 6-12 months post-IPO. Additionally, CFOs are aggressively issuing convertible bonds, further increasing equity supply and signaling potential market tops similar to late 2021.
The thesis, stress-tested
✓ What validates it
- ✓SpaceX IPO launching at or near the discussed $2 trillion valuation
- ✓Underperformance of the S&P 500 market-cap weighted index relative to the equal-weight index
▸ Risks discussed
- ▸Strong retail demand could absorb the IPO supply without pressuring broader markets
- ▸A pause or delay in scheduled mega-IPOs
Hear it yourself
"I wanna start with what is it exactly that started last Friday because it certainly seems to be the beginning of something significant in the markets. Is this the market finally waking up to the Iran conflict, or is it a reaction to the jobs reports and maybe expectations of of rate cuts being harder to come by, or is it something else? And by all means, refer to the slide deck as we dive in. Sure. Yeah. It's it's definitely a fourth quarter two thousand twenty one redux where everybody's kind of been in a transitory trance. Inflation is transitory again, which we were in in the fourth quarter of two thousand twenty one."
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