Has market's IPO fever finally broken?

We know things have cooled by the dearth of new offerings and the nonstop sliding of newer techs. When a stock like GrubHub is the beacon, that's not a good sign.

By TheStreet.com Staff May 1, 2014 12:13PM

GrubHub Raises $192 Million Pricing IPO Above Marketed Range © Jin Lee/Bloomberg via Getty ImagesOnce you brand a market with the curse of the 2000 Nasdaq market top, you immediately have to see whether things are staying on course toward tech-stock apocalypse or whether they will naturally right themselves.


On this front, there's good news for the bulls: In the past 48 hours, we've seen some attempts to halt the rendezvous with destiny that's now becoming common currency. The Street on MSN Money


What are the signs that we don't have to end in oblivion? First, have you noticed that the IPO fountain has turned into a trickle?


We had been getting two, three, four deals a day routinely as the weeks progressed. And the type of deals seemed to be the same: cloud-based, software-as-a-service to some part of the enterprise. A few weeks ago we had so many software-as-a-service IPOs coming that we seemed to have one or two go public almost every day -- hence why I started saying these deals had become software-as-a-disservice to your portfolio, or SAAD, instead of software-as-a-service, or SAAS. There were way too many to keep track of.


In fact, there were a couple of sessions when the things were so chaotic from all of the IPOs that some couldn't even be declared effective on the morning they were supposed to go. Plus, consider the hoopla we saw: characters dressed as food -- GrubHub (GRUB) -- characters dressed as, well, characters -- King Digital (KING) -- and piles of food --Zoe's Kitchen (ZOES). It all made you feel as if you were seeing a top right in front of your eyes. They always say there's no bell that signals the top. Not true: The opening bell of the New York Stock Exchange foretold all you needed to know.


It's gotten so negative out there that this week we saw postponements in not one, not two, but three of the biggest prospective IPOs: the $10 billion troika of AirBNBDropBox and Box. I say "softly" because there are so many rules around IPOs that it's almost as if you can't really talk about them once a deal has been filed. Let's put it this way, though. The reports seem pretty darned thorough that those deals, all of which were putatively valued at $10 billion in the last round of financing, have been shelved.

I can't stress how important these postponements are. While the frenzy in the public markets has been well-documented, the fundraising in the private market has been pretty darned insane. These $10 billion valuations for two data-storage companies, and a website for renting your own house out, were predicated on an extremely robust red-hot IPO market.


The sizzle is now gone. With that, perhaps, this lunacy -- companies with little to no profit but fast revenue growth being valued at $10 billion in the last round of financing -- could, at last, be cooling. Never forget the process. The venture capitalists back new companies at repeatedly higher rounds of valuation. The VCs know that they can either flip these startups to public companies desperate for growth or they can tap the insanely hot public markets.


If the latter has cooled, then the process will go on hold and the stock market will be able to digest all of the new merchandise. Of course, we know that things have cooled by the dearth of new IPOs and the nonstop sliding of the newer techs and biotechs and everything that has come with them. When GrubHub, the food-delivery company, is the beacon -- the stock that's held up the best after its IPO -- it doesn't say much for the market. That's especially given that the company looks eerily like the stuff that got jammed down our throats back in 2000 or, alas, never even had a chance to go public because of the stock market's collapse.


Nevertheless, this $10 billion troika of delayed IPOs can come right back at the drop of a hat, so don't get too enthused. And believe me, the Alibaba deal will cause lots of top chatter if it ever comes.


Finally, we saw a new pattern Wednesday night with the trading in Yelp (YELP) after the company's quarter was announced. Ever since Salesforce.com (CRM) announced its quarter at the end of February, the post-earnings pattern for almost every one of these newbies has been a huge share jump after hours and then a crash to earth by midmorning. Yelp's stock immediately headed down after its earnings announcement, then jumped back up in after-hours trading. New pattern? We'll have to see whether Yelp holds.


Any divergence from the 2000 apocalypse would be most welcome for the bulls. We finally got a couple of them. But it's a total stay-tuned situation.


Jim Cramer headshot



Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio to see the stocks Cramer thinks could be winners.




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41Comments
May 1, 2014 1:10PM
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"The sizzle is now gone." ......... That's what Obummer said when he saw his poll numbers too.
May 1, 2014 2:17PM
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I think about Mothers and Beavers sometimes, as long as it's not my Momma...Bless her soul..


On the way back from a Casino last night, we stopped at the Legion...

They play some pool there on Weds, pm.

This young chick was still there, she was/is a mother...(about 50).

Daughter or step daughter of buddy that was with me....I won late, so I bought rounds.

Yup she was a mother, but she was showing me what looked like soft porn on her Smart phone...

One of the girls had basket balls, another one had a very nice tattoo, wrapped around a muff...

I didn't realize it was a pie, until I looked at it closer...Nice tattoo...nice beav.


I was gonna say something, but I thought she could take me and I'd had too many beers.

And it was my friend's daughter...

She's as big as me with a nice bod, and last night she said she had been in the reserves for 12 years..Now out, but probably just waiting to kick some smart asses booty..

We had all kissed and hugged when we came in, so thought I had better leave it at that...

We closed the place and all went our merry ways home....A very good night.

May 1, 2014 1:04PM
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GRUBHUB.......... That's when Beav's mom cuts the crust off his grilled cheese sandwich for him.
May 1, 2014 4:45PM
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Beav must have the penthouse in the tower of bable.
May 1, 2014 1:13PM
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"VV:The good news for DLH is that Obamacare offers mental health coverage."

 

That's true Beav because if you get some help maybe we won't have to get used to your stupid post coming from a new name each week.......... Go to the doctor.

May 1, 2014 1:06PM
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how can this guy write so many words and say nothing......what a hack
May 1, 2014 12:37PM
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so it's a second tech crash. 

 

they are healthy to go thru. 

 

especially if i'm not part of that mess. 

May 1, 2014 1:20PM
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The market is broken they are covering oblama's a--
May 1, 2014 4:40PM
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Beav is living proof that the "Cornucopia of Retard" exists.
May 1, 2014 2:45PM
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Like I said Beav continually bragging on the stock market is useless. It is kind of like continually bragging about the US being the first to the moon......... Now we have Russia telling us to use a trampoline.
May 1, 2014 1:50PM
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david goodboy writes under How to invest like the top 1% of the 1%  that the IPO's don't look like they are stopping at all.... 

 

who to believe?

May 1, 2014 1:44PM
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Had a few friends participate in IPO's.  The greed light was on and in service.  It isn't fair to generalize but I suspect most are in into these IPO's for personal gain.  For sure there are some that just love their business's and see them as the birth of a child.  I really don't think these are over with but probably just delayed for a more opportune time.
May 1, 2014 3:03PM
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Beav is living proof that the "fountain of stupid" exist.
May 1, 2014 1:52PM
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I wonder why crazy crone raggedy cat lady was not questioning barry's 14 year old dad fighting in WW2 ....... I guess because they are on the same side his bullish*t is ok !!!
May 1, 2014 2:28PM
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Nims....Are you speaking to me or the other retard...??

For the right price I can be a boy toy, for some Lady..

May 1, 2014 1:54PM
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Chicken Little is going to be the Repub nom for 2016 !!
May 1, 2014 2:23PM
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About 40+ comments and NOT ONE about stock IPOs....Except the word GrubHub...
May 1, 2014 2:52PM
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And about that VA thing...( I have no idea, what the Demoncrat connection would be?)

I think they are doing a pretty damn good job...

With what resources they have, and the care has gotten much better most places...

There has been a lot of Influx of troops coming in from the Gulf,(Saudi) Iraq and Afghan Wars...

Plus with many Baby boomers from Korea and Viet Nam getting much older, there has been a lot of pressure on them from those age groups for Healthcare, the last 15-20 years..

Because some have lost other insurances...

As a Service-Connected Vet, I get excellent care for most things...

Except specialties , such as Heart Care, etc...But they do offer that also...I choose others. 

May 1, 2014 1:30PM
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I wouldn't worry about it RM ...imagine her sitting in a room full of catsht with a bottle of gin and her 300 cats blabbing on about govt and those "besterd kids on my lawn" ....Vot !! 

;)
May 1, 2014 1:05PM
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I get the feeling that cramer's masters are short selling this market. Either that or are waiting on the sidelines too buy at a discount.


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