🍋 What the IPO?

Author

Short Squeez
December 30, 2021

Together With

“One of the keys to happiness is a bad memory.” —Rita Mae Brown

Good morning! In today's supply chain news, there is a champagne shortage ahead of New Year's Eve. If you haven't bought your celebratory drinks, you might have a rough time finding your favorite labels. Ghislaine Maxwell was finally found guilty for her role in Jeffrey Epstein's sex-trafficking case. Maxwell, 60, faces 40-65 years in prison for her actions. Gold is set for its worst performance in 6 years... *Bitcoin maxis have entered the chat*

If you want to become a more efficient modeler, check out today's sponsor, Daloopa, which allows you to update earnings models with 1-click.

1. Story of the Day: What the IPO?

Companies that IPO’d this year are down bad. 2021 was a record year for IPOs with ~400 traditional IPOs and ~600 SPAC deals. With the recent sell-off, nearly two-thirds of the companies that went public this year are now trading below their IPO prices (thots&prayers).

Most of the year, things were fine. By November, Class of '21 IPOs were up 12%. By late December they were trading 9% below their IPO price. So, what the hell happened?

1) JPow’s Earlier than Expected Hikes

As inflation vibed its way to record levels this year, JPow & Co (the Fed) signaled that it will raise rates next year, earlier than expected before. The news caused a major sell-off for tech and recently IPO’d names. Higher interest rates change the return profile for riskier investments: 1) People are betting on companies’ profits way into the future, 2) The opportunity cost of investing in risky assets is now also higher and money flows to less-risky assets like bonds.

2) Record Volume & Retail Investor

Another drag on performance might be the sheer volume of companies that went public. 1,000 IPOs in 1 year in any market is not normal.

This was also the year of the individual investor. Everyone and their mom opened a trading account. Retail investors are more volatile than institutions and their involvement can cause wild swings in stock prices.

Retail investors also got more powerful after the WallStreetBets movement earlier this year and can target a stock. Something tells us Robinhood’s (trading 53% below IPO price) journey to the Gulag was “retail revenge” for its role in the meme stock fiasco earlier this year.

Short Squeez Takeaway: Rising rates is certainly not good news for these high-growing companies to turn around their fortunes. IPO pipeline for 2022 is still strong but some companies are starting to rethink their plans. Maybe this time around, they will have to rely on actual performance than the hype around them?

Source: WSJ

2. Markets Rundown

US stock benchmarks rose to record close Wednesday, except for the Nasdaq, which finished slightly lower as longer-dated Treasury yields climbed to one-month highs.

Movers & Shakers

  • (+) Calix ($CALX) +15% on news that it would be added to the S&P MidCap 400 index.

  • (+) Victoria's Secret ($VSCO)+12% after announcing a $250 million accelerated share repurchase program.

  • (–) Cal-Maine Foods ($CALM) -5% after the egg producer reported weaker-than-expected quarterly results

3. Top Reads

  • Economists warn of inflation inequality in 2022 (CNBC)

  • FAA approval of SpaceX Starship launch pushed back at least 2 months (MW)

  • US oil production set to increase further in 2022 (CNBC)

  • Elon Musk's SpaceX raises over $337M in fresh funding (Fox)

  • For the videogame industry to grow, it needs to first grow up (MW)

  • A 1-page financial plan (EI)

  • For a happier financial life in 2022, face your money fears (WSJ)

  • Elon Musk rejects claims that his satellites are hogging space (BBC)

  • Apple ditched Intel, and it paid off (CNBC)

A Message from Daloopa: Let AI Do Your Financial Modeling

Here's a dirty secret: part of being a finance professional (investment banker, private equity / hedge fund investor) consists of being one of the world's best-paid data-entry professionals. It's a pain—and a rite of passage—to build a financial model by painstakingly transcribing information from 10-Qs, 10-Ks, presentations, and transcripts. Or, at least, it was: Daloopa uses machine learning and human validation to automatically parse financial statements and other disclosures, creating a continuously-updated, detailed, and accurate model.

If you've ever fired up Excel at 8pm and realized you'll be doing CTRL C Alt-Tab Alt ESV until well past midnight, you owe it to yourself to check this out.

4. Book of the Day: Gladiators, Pirates and Games of Trust: How Game Theory, Strategy and Probability Rule Our Lives

Game Theory is the mathematical formalization of interactive decision-making—it assumes that each player's goal is to maximize his/her benefit, whatever it may be. Players may be friends, foes, political parties, states, or any entity that behaves interactively, whether collectively or individually.

One of the problems with game analysis is the fact that, as a player, it’s very hard to know what would benefit each of the other players. Some of us are not even clear about our own goals or what might actually benefit us.

In Gladiators, Pirates, and Games of Trust, Haim Shapira shares humorous anecdotes and insightful examples to explain Game Theory, how it affects our daily lives, and how the different interactions between decision-makers can play out.

“The party that’s mentally prepared to fail has a huge advantage.”

5. Short Squeez Picks

6. Daily Visual: Botox is Back

Botox Sales

Source: Axios

7. Daily Acumen: Halt Aging

Japanese researchers have demonstrated a vaccine to remove senescent cells in mice. These so-called "zombie cells" are a key driver behind the aging process.

Senescence is a term given to cells that have stopped dividing but continue to accumulate in our bodies as we get older. These toxic cells have been implicated in a wide range of diseases such as dementia, diabetes, heart conditions and illnesses affecting the kidney, liver, and lungs, as well as osteoporosis and general frailty.

A team of scientists from Juntendo University, Tokyo, identified a protein called GPNBM found within senescent cells in humans and mice. They then created a peptide vaccine based on an amino acid that constitutes the protein. The vaccine enables the body to create antibodies that attach themselves to senescent cells, which are removed by white blood cells that adhere to the antibodies.

The researchers observed mice with arterial stiffening and noted that many accumulated senescent cells disappeared from the affected areas. Crucially, the team reports that their new vaccine has fewer negative side effects than previous anti-senescent cell treatments, while also lasting longer.

8. Crypto Corner

9. Memes of the Day

Reply

or to participate.