Did you hear the one about the “cabdriver and the rich tourist?” If not, it goes something like this…
A very wealthy looking business person arrives fresh off the airplane and hops in the first available taxi and asks the driver to take them to the financial center of the city. The driver says nothing, hits the button to start the meter, hits the gas and off they go.
They drive around busy city streets for an exorbitant amount of time, dodging and weaving through traffic. The passenger asks “Are you sure this is the way?” multiple times and with each one comes the same response “Absolutely, trust me, I know what I’m doing.” He continues on, undeterred.
Finally the driver pulls up to what appears to be a nondescript building and states, “Here we are, that’ll be (fill in any amount that would make you furious.) The passenger pays the fee and exits when all of the sudden realizes they can see the airport and could probably walk back to it faster than the time it took to get there in this cab.
Furious the passenger screams at the driver behind the rolled up window in a profanity laced tirade and finishes with “…and there isn’t even a name on this building, where the he## am I?!”
The driver rolls down his window about an inch and with a cold straight face says “You said to take you to the ‘financial center of the city,’ which I did just that. For you see, I am the financial center and you were just shown precisely how I make my money. As far as the building is concerned, let me assure you, it is the finest and most well maintained building in this city. I should know, I own it and paid for it via the model you just experienced. If you want to go to another ‘financial center,’ such as those containing banks and more? That’ll cost you another fare. Besides, where did you think I or anyone else would take you if you didn’t give me a specific location? Are you not a professional traveler?”
And so is the current story of IPO’s and the so-called “professional investment community.” i.e., If you’re dumb enough to buy in to “We’ll maybe make money, someday,” well your “professional” status allows for them to take your money, legally. Even if the entire thing is basically nothing more than what appears to be a legal scam.
And yes: legal scam. Sure, it’s only my opinion, but I’ve stated such from the beginning, and with every iteration, I’ve been proved more right than wrong. Hint: see Snapchat™ for clues.)
I invented the above scenario to coincide with Friday’s latest IPO debut concerning the ride/cab hailing service known as Lyft™. The demand for this latest “tech wonder” was supposedly “oversubscribed.” It appears (for remember this is all my own conjecture) that the oversubscribed part was just how many could dump-out to the highest
But speed was of the essence, because as the day went on – the bidders were fewer and fewer.
The only thing that appears to have allowed the final bid to be as high as it was – was – the trading ended almost as fast as it started.
Between the hours of 12:00ish ET and the markets close just four hours later, all the hyped up “21% pop” those initial “getting in first!” buyers morphed into 10% bag-holding losses, again, from the first trade and for nearly the entire four hours it seemed as if Lyft couldn’t lift itself off the selling floor. For it went in nearly a straight line down until the mercy of the closing bell was sounded.
“If every picture tells a story…” as crooned by Rod Stewart, let’s use one as they say in Silicon Valley to show the story of this latest IPO darling. To wit:
The above is a chart of Lyft from its opening trade to the close of the day represented by one hour bars/candles. (it shows five because of the few minute start right before Noon)
The real takeaway with the above is, as I said prior “…it went in nearly a straight line down until the mercy of the closing bell was sounded.” For as you can clearly see, there was no “off the lows” respite into the end.
Could it surge into oblivion on Monday? Sure, but the above does not sport a very promising start for what has been deemed the “IPO to show that IPO’s are back!” As a matter of fact, it may show that they are as dead-and-buried as their business model will become once any remaining investor cash is burned through.
This farce of stating a company is worth $Billions upon $Billions when it couldn’t even purchase a ride across the street using its own service via its net profits (for there are none and maybe never will, think about that) is an abomination to everything once considered business, never-mind business ethics.
This is not capitalism. This is pump-and-dump chicanery wrapped around a legal business construct that only the most naive and stupid of “professionals” could ever endorse. This is what central bank interventionism has wrought. i.e., the legal ability for V.C. snake-oil-producers to sell their scheme to an unsuspecting public via their “professional investment managers.” You know, as to make sure one has some “growth” companies in their portfolios.
It’s disgusting. Period, full stop. And it’s going to end, but probably not before it’s true tale of devastation gets revealed.
You see the issue with all of the above is that reference I continue to make as “professional” is precisely the term used in court as to show the people “buying in” were of the sophisticated type. e.g., they have their “shingles” as the saying goes.
This way when it all goes “poof” they can say to the judge and jury, “These people claiming losses from their investment are professionals by trade and understand inherently any and all of the underlying risks. And may I remind them, those risks, as in ‘we openly stated we may never make any money’ were posted in all of our paperwork, so we can hardly be of any blame for them losing their investment.”
And there is where it will be shown that that is entirely correct. The problem?
Those “professionals” more often than not are only professional at one thing: Investing your money, Or worse, for your pension fund, you know…
Because you have to have exposure to “growth.” Regardless if it’ll be around at all in said future – or not.
© 2019 Mark St.Cyr