- Candy mascots as a symbol of everything wrong with IPOs
- What everyone forgets about Facebook, but we haven’t
- Rickards on gold’s recent drop, and when to expect a recovery
- “Good” news about inflation and Social Security
- Awaiting Round 2 of marijuana-investing possibilities… The 5 hears out a skeptical reader… another casualty in the War on Cash… and more!
Pity the poor suckers who bought King Digital Entertainment at any time it was a publicly traded company.
We documented the case more than two years ago. Since then, there’ve been further developments that merit a revisit.
These developments reinforce our long-standing and paradoxical point about initial public offerings, or IPOs: The best time to get into them is before they go public.
Which sounds impossible if you’re a retail investor. But it’s not, as our small-cap team has been suggesting ever since we sent you a special breaking-news edition of The 5 on Sunday.
If you want the most immediate developments, scroll down for today’s Overtime briefing from Wall Street Daily publisher Robert Williams. If, however, you prefer some 5-style entertainment with your investing insight, read on…
King Digital made its debut on a spring day in 2014. To mark the occasion, candy mascots took over the floor of the New York Stock Exchange and accosted the few traders who still work the floor in this electronic age…
Because it wasn’t enough for them to ring the opening bell, apparently…
King Digital hit it big in 2012 and 2013 with the online game Candy Crush Saga. Not surprisingly the company decided it would be a fine time to go public.
The IPO price on March 26, 2014, was $22.50 a share. On Feb. 23 of this year, King was bought out by another gaming firm, Activision Blizzard. At $18 a share.
At no time in the 23 months King Digital was an independent publicly traded company did shares touch the IPO price…
Only days after its debut, the media boo-birds were piling on: “For some investors, the deal brought back memories of the internet boom and bust in 1998–2001,” said Reuters. The IPO market was being brought “back to Earth.”
“Why should this be described as a failure?” wrote Tim Worstall at Forbes, looking through the other side of the lens.
“King Digital managed to sell at $22.50, nearly 20% higher than what the market thinks is, a couple of days later, a fair price. King Digital, and any of the early investors, have got more money than we now collectively think they ought to have done. This is a success for King and those early investors.”
But that’s how it goes with every IPO — even the successes.
Facebook’s IPO price was $38 on Friday, May 18, 2012. Herewith, a chart of that day’s action and the morning of the following Monday, as published here in The 5…
It was 14 months before FB would see that $38 mark again. Somehow, we doubt very many of those IPO buyers stuck around that long.
But that speaks to the allure of the “hot new thing.” There’s nothing rational about it. It’s all emotion.
Another example from The 5’s wayback machine: On Oct. 3, 2013, Twitter announced it would begin trading publicly as TWTR effective Nov. 7.
That wasn’t soon enough for some “investors” who failed to read the fine print. They rushed to bid up shares of Tweeter, a bankrupt home-theater retailer trading as TWTRQ. (The “Q” is how you know it’s bankrupt.). TWTRQ raced up 700% in a matter of hours.
One more wrinkle: If you buy an IPO, you might as well just stroke a check for the underwriter — usually an investment bank like Goldman Sachs or Morgan Stanley.
Typically, a company that wants to go public hires one of these firms to underwrite the deal. The underwriter then appraises share prices and acquires them at an agreed-upon price. Finally, the underwriter marks up the share price for sale to the public.
The formal term for that markup is the “underwriting spread.” It can run as high as 10%.
“Clearly, the ideal time to invest is long before a company goes public,” says our new colleague Greg Miller, affirming the guidance we’ve been sharing for years.
“Yet pre-IPO shares are limited only to the wealthiest of individuals — ones with millions to invest in venture capital funds.”
We cited the example yesterday of Peter Thiel’s investment in Facebook — every $500 invested turning into $1 million.
But Greg, along with Louis Basenese and the rest of the Wall Street Daily team, have uncovered a way for you to get in on the hot new thing before it becomes the hot new thing. We’re talking about the fastest-growing private technology company of all time — even faster than Facebook.
Curious? Eager for more? Scroll down for today’s Overtime briefing. Because we have other matters to attend to during our allotted 5 Mins…
Nearly every asset class is getting bid up on this Tuesday morning: The Dow is up a half percent at 18,184. The 10-year Treasury yield rests at 1.75%. And gold is showing signs of life, the bid now $1,262.
And it’s not dollar weakness, not too much anyway — the dollar index is hanging in there at 97.8.
Finance continues to dominate the early earnings reports: Goldman Sachs and the asset manager BlackRock both beat expectations.
“Gold’s recent drawdown from the $1,330 per ounce level to $1,250 per ounce is easy to explain,” says Jim Rickards.
“It represents a one-time repricing by the market based on expectations of an interest rate increase by the Federal Reserve in December. Those expectations are correct; the Fed will raise rates in December. Since gold has no yield, any increase in the yield on competing investments (such as Treasury bills) makes gold less attractive to hedge funds and institutions. This accounts for the repricing.”
But what now? The Fed wanted to raise rates several times last year… but that’s what the Fed wanted this year too and hasn’t had the gumption to pull the trigger to do. The economy is too weak to withstand it. “A Fed rate hike will result in a stronger dollar (that’s already happening), more deflation, fewer exports and weaker real and nominal growth,” says Jim.
To say nothing of a 10% stock market correction, as happened when the Fed raised in December of last year.
“In short, the Fed will raise rates, but the move will be counterproductive and will cause the Fed to reverse course and send dovish signals almost immediately,” Jim goes on.
“That reversal by the Fed will send gold soaring again. There are other tail winds for gold including election uncertainty (Trump has spoken favorably about using gold as a monetary standard) and geopolitical uncertainty (the U.S., Russia and Iran are on the brink of war in Yemen and Syria, with shots being fired by all sides).
“The gold outlook for late 2016 and early 2017 is almost an exact replay of what happened in late 2015 — a bottom in November, followed by an enormous bull market in December, January and February.”
Hey, Social Security will deliver a cost-of-living increase this year.
That’s the takeaway from the inflation figures this morning. The consumer price index rose 0.3% in September and 1.5% year over year. Tucked into the report from the Bureau of Labor Statistics is a note that the Social Security COLA — cost-of-living adjustment — for 2017 will be 0.3%.
Meager, we know, but better than last year — when there was no increase at all.
As always, we caution any resemblance between the official numbers and your own cost of living is purely coincidental. Inflation as calculated by Shadow Government Statistics — using the same methodology the feds used during the Carter administration — is running 9.2%, the highest in two years.
On the investable-marijuana front, we see a remarkable shift in public opinion.
“Today, 57% of U.S. adults say the use of marijuana should be made legal, while 37% say it should be illegal,” says a report from Pew Research Center. “A decade ago, opinion on legalizing marijuana was nearly the reverse — just 32% favored legalization, while 60% were opposed.”
Fully half the states have now legalized marijuana to one degree or another. Three weeks from today, Americans in nine states will have a say on establishing or expanding legal weed.
That’s timely, as our research team is hard at work uncovering the next profitable medical-marijuana plays. Already, they’ve notched successes in the last six months of 36% and 62%.
For this next round, we’re on the hunt for less-risky plays that are better suited for entry-level investors. Stay tuned…
“The latest overblown technology you guys are spouting off about is going to take on the automotive sector and the oil sector?” writes a skeptical reader. “Really?
“As with most of these ‘big’ stories, you could be right — someday. Just like the market correction and implosion that is long overdue, you guys will be right at some point as long as we all live long enough.
“Please feel free to inform your pals at Wall Street Daily that we already need special training to operate our cars — it’s called a driver’s license.
“Of course, I will keep reading The 5, as it is always entertaining, and sometimes I learn something useful.”
The 5: Here’s the thing: Fortunes are already being made in this fast-moving niche sector. It’s just that retail investors have been shut out — till now. That’s our whole point about how the big money in IPOs is made, well, before the IPO.
We’re scrambling to put together an exclusive briefing Thursday evening to get you up to speed. We don’t even have a signup link ready yet. But we’re plenty excited — again, see today’s Overtime, below.
“Just returned from visiting Chinese friends in Vancouver, B.C.,” reads a frontline dispatch from the War on Cash.
“While shopping at a high-end clothing store in the tony Gastown area, we purchased a T-shirt made of cashmere and synthetic fibers for $180, but the cashier could not take our two crisp C$100 bills. The store takes cards only.
“When asked why, she indicated the store had started as a pop-up venture on the internet and when they opened a brick-and-mortar store, they never opened a bank account to handle cash. Interesting.”
The 5: “We would like to be a catalyst for taking cash out of the system,” Apple CEO Tim Cook said yesterday in an interview we spotted.
He’s all keen to have folks sign up for his Apple Pay digital-payments service. “We don’t think the consumer particularly likes cash,” he added. Hmmm…
“I’ve been reading The 5 for years, and those that accuse you of bias just aren’t paying attention,” writes our final correspondent.
“Geez, it should be obvious by now, especially in this sad election cycle, that most of you at Agora lean to the libertarian side, if toward any political party at all. You wear your ‘contrarian stripes’ on your sleeves, obvious to anyone really paying attention. Although David Stockman was once part of the Reagan administration, he certainly is not Republican-leaning! I agree with his analysis that this election will change (and already has) the Republican Party forever.
“I agree with him to say, ‘Good riddance!’ to existing parties! This country is best served by having the corrupt political system implode along with major economic changes coming our way. I’m one reader who’s not worried you’re too partial to either party. It’s apparent you would prefer scrapping the whole mess and starting over. Keep up the good work!”
The 5: Yes, well, up to a point. We’re keen for the proverbial “fresh start.” It’s what happens between now and then that we wonder about…
The 5 Min. Forecast
P.S. Speaking of what happens between now and that “fresh start”… David Stockman’s written a whole book about it.
It’s called Trumped!: A Nation on the Brink of Ruin… and How to Bring It Back. (And no, it’s not an endorsement of Trump.)
We see copies are once again available at Amazon. But we can’t imagine why you’d order it there when you can order through us and get a bonus chapter with specific investment advice shaped by David’s decades of experience in Washington and on Wall Street.
You’ll also get a 30-day trial of David’s daily Contra Corner emails… and instant access to a model portfolio to see you through these coming turbulent times.
And all for a mere $4.95 — just enough to cover our shipping and handling is all we ask. Get your copy right here, right away.
There’s a certain category of investors who run circles around Warren Buffett. And right now they’re into the fastest-growing startup ever. You have a chance to join them, as Wall Street Daily’s Robert Williams explains below…
I’ll keep this short because I know you want to get to the good stuff right away.
Of all the exciting, runaway developments I’ve shared with you this week…
By far, the one that created the most buzz is this:
The reason this opportunity is so special is because it allows regular investors to LEGALLY grab a share of a hot, fast-moving private company… BEFORE the initial public offering.
That’s an unheard of development. But like I said, this is a rare, life-changing opportunity indeed.
If you’re curiosity is killing you right now, click here to go straight to your free report on making pre-IPO investments.
I lost count of how many emails came in about this since I first mentioned it on Sunday.
I guess I shouldn’t be surprised. After all, this is a big deal. Everybody knows that venture capitalists, hedge funds, angels, and other mega-rich accredited investors are making millions… even billions… on the private market.
And that thanks to outdated, decades-old regulations, regular investors have been COMPLETELY cut off from these highly-lucrative investments.
Just how much has that cost you?
Well, the average venture capitalist has a track record almost ten points better than Warren Buffett’s at Berkshire Hathaway.
So quite literally… priceless fortunes have been lost by the average American because of short-sighted federal regulations that are now more than 80 years old and completely out of touch with current reality.
You know the rest… the rich got richer, and the system has been stacked against you since day one.
Not anymore. Because this week, Lou Basenese will finally unveil his highly-anticipated way to get your shot… 100% legally and with just five minutes of your time.
With this particular opportunity, that means you’ll finally get to take a seat at a table of insiders that includes Amazon CEO Jeff Bezos… Google Ventures… Menlo Ventures… Scott Banister… a handful of Goldman Sachs’ ultra-high-net-worth private clients… and many more.
How many of your friends can say that?
The VentureCap Strategist team has coverage on why this is such a special circumstance in today’s free report. Get it by clicking here now to discover more about these rare pre-IPO opportunities. You’ll earn ANOTHER $125 bonus when you do.
You picked the right time to follow along. Here’s why: as you’re about to discover, in many cases the money made pre-IPO dwarfs what gets made after the IPO. That alone is great news for your timing this week.
But it gets even better.
This isn’t your average company.
It’s the fastest growing private technology company of all time (even faster than Facebook).
Are you beginning to see why everyone here at the office is going absolutely nuts this week? I personally have barely slept since Saturday. Too much to get done. Too excited to close my eyes.
Find out more by clicking here (PLUS earn another $125 bonus).
To getting Venture Capital rich,
Executive Publisher, Wall Street Daily
PS – There’s A LOT going on behind-the-scenes. It’ll all make sense to you after Thursday’s live event. Complete details on how to reserve your seat to this limited, exclusive briefing will be sent tomorrow morning. Keep your eye on your inbox. You DO NOT want to miss your invitation or get stuck at the end of the line. Until then, click here for to discover the secret of pre-IPO investing most people will never hear.