It's not all that often I get giddy about a new investing idea. A lot of them cross my desk. But this one has my leg shaking. Last week, I was talking with some colleagues in the industry about the immense power of the free market to make people money. No matter the obstacle, it always finds a way. The latest proof is in the idea that stands at the core of the mighty capitalist mindset. One well-known financial rag says it's the "hottest thing on Wall Street." Others have said it's the start of a financial revolution. The headline writers at The Economist call it a "rebellion." As for me, I recently went on camera in the heart of New York City to say, "It's probably the single best shot everyday Americans have to make extraordinary wealth in this market." That's a bold statement... so let me explain. The System Broke For nearly two decades, I've watched as initial public offerings (IPOs) have become riskier and riskier - not just for investors but also for the companies behind them. While IPOs were once a way for savvy investors to get into a company at the "sweet spot" of growth and reliable sales, they've recently become too burdensome and expensive for many startups to take advantage of. Historically, companies would go public at the point where their growth turned hyperbolic. Needing some cash to take full advantage of their growth potential, they'd open their shares to the public and let everyday investors in on the action. It created an ideal opportunity for investors. You may remember when Microsoft (Nasdaq: MSFT) went public in 1986. Back then, it was a typical IPO. Unlike many of the mega-IPOs we see today, the software firm was a tiny company when it first opened to public trading. Its first shares sold for just $21... with a market cap of just $777 million ($1.7 billion in today's dollars). Shares tripled in their first year! Compare that with the Coinbase (Nasdaq: COIN) IPO... and its staggering $86 billion valuation. It was 50 times bigger than Microsoft at its debut. That's nuts. It has done just what I told my readers it would do. Coinbase is down 30% in the month or so it's been public. Clearly, something is broken. The IPO system isn't what it once was. The problem is obvious. | 
No comments:
Post a Comment