Thursday, January 27, 2022

Corporate Insiders Sold Post-IPO Stock Shares at Record Pace in 2021

 The other day, I wrote:

The American public's attitude toward monopolies and big business is changing, which is why Lina Kahn was voted in as FTC chair with overwhelmingly bipartisan support. The insiders realize the gig is up and have been selling for close to a year, which led to the IPO and SPAC bonanza in 2021, leaving public markets and retail investors holding the bag.

As reported in the FT the other day, 2021's IPO vintage saw record selling from insiders, which supports the above assertion.

Will take a deeper dive on a later date, but one thing to consider: the 2010s were a period that saw an explosion of unprofitable "tech" companies capitalized at monster valuations which could not be supported by internally-generated cash flow, and therefore required constantly raising new outside capital (and diluting existing shareholders). Some have affectionately dubbed this the "ponzi sector." This concept was encouraged by the idea that they would come to dominate and monopolize their respective industries. And while most on Wall Street blame this behavior on the Fed "lowering rates" and "pushing investors out on the risk curve," I'd like to offer a different explanation: we consistently ran budget deficits in the 2010s, which meant there was a constant stream of fresh new dollars entering the economy. The powers that be forced those dollars into specific uses, such as capitalizing new tech "unicorns" (and paying marketing rents to Facebook and Google while doing so). The combination of tougher antitrust enforcement and the federal government running a budget surplus has ruined that party, hence the absolute bloodbath that's taken place in the market for these names.

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