Initial public offerings (IPOs) in the second quarter of 2014 surged 42 percent, the highest since 2000, right as the “Dotcom bubble” was bursting sending stocks dramatically lower.
88 IPOS marked in 2Q’14
In the second quarter of 2014 88 IPOs marked the highest total since the third quarter of 2000, when there were 135. During the “Dotcom bubble” crash, from March 11, 2000 to October 9, 2002, the Nasdaq lost 78 percent of its value, falling from 5046.86 to 1114.11 over that period of time. Excessive IPOs are often considered a sign of excessive market speculation by professional investors as they typically occur during market environments of overvaluation.
Gross proceeds from the IPOs grew 57% year-over-year and reached $22.6 billion in the second quarter, marking the highest sum since the fourth quarter of 2013, Factset noted in a research report. June activity also showed strength in terms of proceeds, with the $9.0 billion IPOs gathered from investors growing 131% year-over-year and representing the highest amount since October, which pulled in $13.4 billion. It was the highest June total since 2007. As a point of perspective Facebook Inc (NASDAQ:FB)’s initial public offering raked in $16 billion alone.
Growing IPOs an omen for a potential market top
In March of 2014 a Yahoo Finance article noted the potential for a market top due to apparent delirious market conditions back then. Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, then believed the large numbers of IPOs to be an “omen” for the Dow Jones Industrial Average (INDEXDJX:.DJI). “All of those IPOs are a sign for a potential top here,” Ross was quoted as saying. “It’s just part of a growing litany of bearish evidence here for the Dow.”
Interesting to note the 156 public offerings in the first half of 2014 have already surpassed the full year totals in 2011 and 2012, with 136 and 137, respectively, and have amounted to more than two-thirds of the 2013 total of 230, the report noted, saying “This uptick also showed no sign of reversal.” As if to put the numbers in perspective, the number of IPOs in June, 35, grew 84 percent and was the highest monthly total since August 2000.