Will Twitter’s IPO mark the top of a bubble? Co
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Will Twitter’s IPO mark the top of a bubble?
Commentary: IPO market is no where near as overheated as in late 1990s
CHAPEL HILL, N.C. (MarketWatch) — Though Twitter’s upcoming IPO has rekindled worries that another dot-com bubble may be forming, the new-issue market actually is nowhere close to being as overheated as it was in the weeks leading up to the top of the internet bubble in March 2000.
That isn’t to say that there aren’t other signs that exuberance on Wall Street may be approaching the irrational stage, as I mentioned in a column last week. My argument in this column is instead that you need not become even more worried just because Twitter is planning on going public.
To put into proper context the contrarian significance of a possible Twitter IPO, I turn to research conducted by Malcolm Baker, a professor at Harvard Business School, and Jeff Wurgler, a professor at New York University. Among the sentiment indicators they found to have forecasting value, from a contrarian perspective, are two related to the IPO market: The number of IPOs recently coming to market, and the average gain of those IPOs on their first day of trading.
Take a look at the accompanying chart, which focuses on the first of these two indicators. Notice that, while the number of IPOs coming to market is higher this year than last, it’s nowhere near the levels seen in the latter half of the 1990s. Nor, for that matter, are recent levels close to what was seen in the early 1980s, when that decade’s bull market was taking off. http://www.marketwatch.com/story/will-twitter...2013-09-25
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