Zipcar Inc., the car-sharing company, has not turned a profit since its founding in 2000. Its net loss climbed to $14.1 million in 2010, up from a $4.7 million loss in 2009. Yesterday it filed for an IPO in which it is offering 8.33 million shares for $14 to $16 each. It expects to use the proceeds to pay off debt, oh yeah, and for “business expansion.” Hmmm, a company with a history of 11 consecutive years of losses expecting to raise as much as $133 million from an IPO–when have we seen that before? Maybe Ben should put aside his obsession with the Great Depression for a moment and investigate the late 1990s.
Source link: http://archive.mises.org/16301/sound-vaguely-familiar-ben/
Sound Vaguely Familiar, Ben?
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How many years did Amazon lose money?
What’s the point of this article? Unprofitable companies in the past have opted to go public to increase capital, grow their business and reduce their debt. It is up to the individual and institutional investors to determine if future growth is sustained and their valuation is accurate. If not, the short sellers, the hedgers will see right through this and will jump on this stock and eventually drive down their stock price.
I believe the point of this posting is that IPOs for companies with this type of profitability track record would be infrequent in economic environments that are not characterized by significant levels of debt monetization, credit expansion, and money creation. When the adjustment eventually occurs, the Zipcar Inc. IPO will likely be another example of a malinvestment made possible by the artificial and unsustainable boom created by the monetary policies of the Federal Reserve.
The point of this article is to say that purchasing 600 billion dollars worth of bonds by the Fed as apart of its QE2 program is propping up the stock market. Just like the easy money policies of the 90s propped up the stock market to ward off fears of a Y2K meltdown. In June, or before, the Fed’s program will end. What effect will this have on the stock market and will it be any different than what happened when the Fed tightened earlier this decade?
KP, the point you’re missing is that 2011 has had more IPOs than the previous three years combined–if that’s not a sign of the stock market being propped up, then nothing is.
BillWald, when it comes to Amazon, the wrong question was asked. How many quarters did Amazon’s revenue grow by double-digits?
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