‘It’s silly season’: Airbnb and DoorDash’s IPO rallies signal return of dot-com-era greed, strategists say

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The Airbnb logo is displayed on the Nasdaq digital billboard in Times Square in New York on December 10, 2020. Photo by Kena Betancur/AFP/Getty Images
  • Airbnb and DoorDash’s massive debut rallies suggest the IPO market is getting ahead of itself, top strategists said Thursday.
  • Airbnb spiked 115% when it began trading publicly for the first time on Thursday. DoorDash closed 86% higher in its Wednesday debut.
  • The first-day climbs reveal “euphoria and greed” last seen in the market during the dot-com bubble of the late 1990s, said Paul Schatz, president and chief investment officer of Heritage Capital.
  • “It’s silly season,” and investors need to differentiate between “a great company and a great price or value,” Rich Steinberg, chief market strategist at The Colony Group, told Business Insider.
  • Visit the Business Insider homepage for more stories.

Airbnb and DoorDash’s colossal post-IPO pops reveal unsustainable euphoria in the stock market, top strategists said.

Some of the year’s biggest initial public offerings took place this week, adding to an already record year for market debuts. DoorDash soared 86% when it began trading on Wednesday after raising $US3.2 billion through its offering the day prior. Airbnb leaped 115% when it began trading Thursday afternoon, pushing its market cap above $US100 billion and raising $US3.5 billion.

The first-day rallies, while extraordinary, show “euphoria and greed” that’s likely not been seen in the stock market since the dot-com bubble of the late 1990s, Paul Schatz, president and chief investment officer of Heritage Capital, said. Many investors are rushing to the new stocks wanting to get in at any price, but such massive IPO bounces usually give way to similarly outsized losses, he added.

“It’s silly season,” Rich Steinberg, chief market strategist at The Colony Group, told Business Insider. “Investors need to distinguish the difference between a great company and a great price or value.”


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Both strategists attributed some of that euphoria to the near-zero interest rates expected to stay put over the next three years. The Federal Reserve’s plan to hold rates at record lows leaves investors with fewer places to put their money, as the policy suppressed Treasury yields early in the pandemic. The Fed’s backstop of the corporate credit market placed similar pressure on bond yields.

The combination of near-zero interest rates, a “tsunami of liquidity,” and hundreds of billions in unallocated investor cash fuelled the two buying sprees, Schatz said.

The week’s booms might only only the start. Investors could face “complete and utter mania” across the IPO market in the first half of 2021 as more firms look to tap the market while demand remains strong, the Heritage Capital president said. Investors should avoid trying to time such volatile debuts and instead be patient until stock prices better reflect firms’ fundamentals, he added.

“Being the last guy buying the opening of a hot IPO, at the height of this speculative excess in some of these names, typically does not end well,” Steinberg said.


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