Looks like a tech bubble. Walks like a tech bubble. Is a tech bubble.*
That seems to be the quickly developing school of thought in the United States, where such bubbles are both made and popped.
As a wise person with many years in the sector said, when people start telling you with increasing certainty that “this time it’s different”, then it’s time to start walking purposefully towards the exit.
Don’t run, you want to get out the door before the panic sets in.
And while the hoards are not yet rushing for the doors, there are certainly signs that more than a few are at least checking the quickest way out.
And the smart money has pretty much been made.
According to a report by Renaissance Capital in mid-October, 60 per cent of IPOs from 2015 are trading below their listing price and the number of IPO deals was down 43 per cent from the last quarter.
The looming question for Australia is whether home grown software company Atlassian, which is planning an initial public offering on the New York Stock Exchange using a private valuation of US$3 billion, will get its deal over the line.
Criticised, a mite unfairly, for heading for the US market instead of home, it is the US that will first feel the chill winds of a market reversal.
It could just be that Atlassian’s timing is exquisite and it will be one of the last companies valued in the billions of dollars to get its float away. Or perhaps its promoters – Morgan Stanley and Goldman Sachs – are beginning to sweat, in which case they will pedalling as fast as they can to get this away, so expect some more news soon. It’s hard to tell from sunny Sydney, as InnovationAus.com financial market’s spies say that the all the work is being done in the US.
Still, for those wishing to get their valuations and/or cash in their chips, time may well be running out.
The repercussions of a tech bubble burst for the technology and innovation friendly Turnbull government, would be interesting to say the very least.
Any downturn in the tech sector, would be jumped upon by certain dinosaurs in the “old economy”.
But the fallout would not be as widespread, as US technology media has been reporting, as the rush towards the public markets has not been so quick compared with dotcom 1.0, whose bubble popped so dramatically in early 2000 searing the sector forever.
And Atlassian, at least, so its backers tell us, has been squarely focused on profitable growth. While that’s often an industry rarity the company is 13 years old so if not now, when? investors should be asking.
But for those with truly innovative ideas, the message should be: soldier on – bubbles may raise valuations and their popping may see those paper numbers slide, but a good idea and a good business will always be a good idea, and if managed properly, a good business.
*with apologies to our web-footed friends