Fund, Drop & Run: The Tale of Attention-Seeking Tech IPOs

“Mattermark ran numbers on more than a dozen technology public offerings that went live last year, and the results are stark: at the time of writing, only one company in the set managed to deliver a share price higher than its first day closing value. Among the group of thirteen companies, just five are currently trading above their original IPO prices.” Alex Wilhelm, Mattermark

By Alan Steel

There’s a unique level of excitement that surrounds $multi-billion tech IPOs – considered the sexy end of the investment market – despite the majority having no discernible profitability, revenue streams or solid future plans for same.

Most arrive with one syllable names or numbers, with only a poet’s reckoning of how that links to the actual product.

But it sounds cool and new, and boy does it catch views and eyeballs.

Jings, we should create a new industry sector category – a child to the Technology grouping – and call it the “Attention Seekers”.

The venture capitalists – often billionaires themselves – jump on board early during the audience capture stage; eager to fund-out, find a profitable exit at the point of said “Attention Seeker” joining a stock exchange…and then drop and run.

That’s the game: euphoria lands all those desperate investors’ hands with a valueless lump of technology – great idea, but no one knows how to monetise it.

Now, like anything in the investment space, there are no absolutes. And that means not every attention seeker is a loser.

But I like Josh Brown’s rather acidic sentiment today about the tech IPO space, and it jibes nicely with Alex Wilhelm’s (Mattermark) piece on the subject – his graphic is above.

Josh writes: “Selling hot IPOs to investors isn’t part of how we do wealth management. I don’t really care if ‘that’s what the clients want.’

“If they’re coming to us for financial planning help, it’s not about what they want, it’s what they need.

“And they don’t need to take VC billionaires out of inflated technology IPOs in order to retire.

“I’m not anti-IPO, it’s fine to play. But it’s also fine to keep walking past the casino on your way to the elevators too.”

Beware the attention seekers. They’re too often exactly what they seem.

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