A warning to all those tech companies thinking of IPOing: what goes up must come down. And at the moment it’s plummeting.
Let’s start with last week: the Nasdaq, market of choice for tech glitterati including Facebook and Google (but not Twitter), fell 2.6% between Monday and Friday, while major tech stocks – including Facebook, LinkedIn and Twitter – all dropped. To wit:
This morning, that crossed the Atlantic, with the likes of chip designers ARM and Imagination Technologies, French mobile network operator Iliad and mobile manufacturer Nokia all dropping:
What’s going on? Analysts reckon investors have finally succumbed to all those bubble rumours – and they’re getting out as fast as they can.
‘There seems to be some rotation out of any names which have effectively been labelled a ‘bubble’ over the last six months or so and there seems to be some money being repositioned into names which have been returning cash to shareholders,’ Chris Weston at IG Index suggested.
In other words: it's no longer enough for businesses to be young and hip.
Does this mean an end to the short-lived IPO boom? The disastrous flotation of UK games designer King in New York suggests investors are becoming choosier about where they put their cash. Dividends may be old-fashioned, but they're a sign to shareholders that their support hasn't been in vain. Time for businesses to put their money where their mouths are, wethinks.