
Ask HN: There are 5 S-1 posts on the front page, what explains the rush? - ladberg
Is it just because the stock market is doing &quot;well&quot; right now or is there some other explanation?
======
TallGuyShort
Links to the referenced 5, since one just dropped off the front page: Sumo
Logic:
[https://news.ycombinator.com/item?id=24262251](https://news.ycombinator.com/item?id=24262251)
Asana:
[https://news.ycombinator.com/item?id=24265430](https://news.ycombinator.com/item?id=24265430)
Snowflake:
[https://news.ycombinator.com/item?id=24265041](https://news.ycombinator.com/item?id=24265041)
JFrog:
[https://news.ycombinator.com/item?id=24264478](https://news.ycombinator.com/item?id=24264478)
Unity:
[https://news.ycombinator.com/item?id=24261559](https://news.ycombinator.com/item?id=24261559)

I understand the stock market very poorly and had the same question myself, so
this may be way off the mark, but I wonder if it's because of pessimism in the
economy that non-public investors are harder to milk right now. It's unusual
to see this many S-1's on HN, even more unusual that I've heard of most of
them before.

~~~
jonahbenton
Macro assessments of "the economy" play some role in expectations, but the
economy is not comprehensible as a monolith. The predictive value of
assessments of the "economy" on any one specific business are basically
useless.

Rather, individual businesses are evaluated on their own individual
trajectories, physics, prospects, and teams. Many of these have done well in
COVID times and have stories aimed at convincing investors that improved
performance will continue- independent of, or in inverse relation to larger
negative macro assessments.

I haven't read these S1s but am sure this is the case here.

There are also technical- financial technical, not technical technical-
reasons that make one moment better than another for seeking capital, and now
is "good" for certain kinds of companies. It is also lifesaving for others-
like Kabbage being bought by Amex a couple weeks ago. Their business (I
believe) has basically been destroyed by the pandemic so Amex was able to get
a good deal.

You should just read the S1s. The stories they tell are in fairly
straightforward language, amidst a lot of transparency and compliance
gobbledegook. But if you know a little about the companies you can probably
arrive at an opinion about their narratives.

Cheers.

------
KerryJones
I might be able to provide context as a money manager and employee of a pre-
IPO startup that considered IPOing right now.

Companies prefer to IPO when they show the strongest growth as it likely will
lead to the highest valuation at time of IPO -- regardless of other
fundamentals (such as profitability). These companies are likely doing very
well for a combination of reasons: \- Lockdown has increased use of their
services \- The market is in a large upswing right now

This makes their growth look phenomenal to investors, and likely, their board
members who want to cash out see this as an opportunity.

There has been a bit of a "dead zone" for around the last year with people
thinking the market was going to slow down for a recession and it has been
considered hard to "raise money". A lot of people also believe a longer
recession is still coming (I'm one of them).

This means that we likely have a short window where growth / income look
fantastic for a few companies. The next opportunity might be in 2-3 years.

\--------------

Also, as an investor, I think this is terrible practice as I believe the
fundamentals of the investment are far more important than black swan-type of
events giving you a growth spurt.

~~~
giantg2
There's a lot of demand for equities right now due to the low rates and more
pessimistic outlook on other securities. I think that can help drive up the
amount they can raise.

------
d_watt
Asana lost 120m last year

Snowflake lost 350m last year

Unity lost 160m last year

Sumo Logic lost 43m last year

Jfrog lost 400k last year

Out of curiosity, is it normal for companies to IPO this far away from
profitability, or is this a recent tech thing? I feel like it was a big deal
when uber IPO'd so far away from profitability, now it seems standard.

~~~
KerryJones
"normal" in the last 10-15 years -- yes. That doesn't mean it's a good deal.
The "recent" idea has been to project growth (rather than profit) as the
primary metric, with the idea that eventually when "dominant" in the sector
the money that goes into growth will multiply profitability.

I don't subscribe by this method.

Another thing to keep in mind is that IPOs are usually done for 1 of 3
reasons:

1) To allow an exit for investors

This means that you have to think you know more than their current investors
do about their growth -- unless the investors have other specific timelines
(sometimes they do), or else you're buying what someone else thinks is no
longer a good use of capital.

2) To raise money

This means the company needs more cash, either for "growth" or because they
will fail without it. Again, you should be certain that this company-in-need
deserves more money.

3) To create a sense of "official-ness".

Some companies can be better respected in their industry and helps with their
brand if they're public.

It's been reported that public CEOs often spend about 50% of their time
working on matters that relate to simply being public. It's one of the reasons
that Warren Buffett will sometimes take companies private after buying public
ones -- to afford them more time and energy to work on the actual company.
There's very little about going public that actually makes a company better.

~~~
philsnow
Another big reason is to make it easier to do acquisitions.

It's a lot easier (for both sides!) to buy another company with your stock if
there is more confidence in the valuation, that way everybody knows what
they're getting (or giving away). One way to get a really, really solid
valuation is to be publicly traded.

------
dang
One explanation is just that submitters tend to imitate what's already on the
front page.

[https://news.ycombinator.com/item?id=24265770](https://news.ycombinator.com/item?id=24265770)

------
jackhalford
I remember the same thing happening last year at the same time (late august),
so my guess is that it that this timing has something to do with financial
optimization of S-1 filings.

------
jeffbee
When prices are high, people sell. Simple as that.

~~~
robjan
You can only sell if someone's willing to buy

~~~
jeffbee
Sure but if there wasn't a buy-side prices wouldn't be increasing.

------
rvz
It is nothing more than a greatly-timed opportunistic race to the finish. The
same rush happened in August and September 2019 and right now they are at it
again, before they lose out as they nearly did due to the virus and also
towards other uncertain characteristics happening in 2020.

------
ponker
Yes, basically stocks are very high considering that economic collapse is a
likelier possibility than it has been in a while. So companies that were
trying to pick the right time to IPO are filing now to get that green in the
bank before the market implodes.

~~~
ideals
If all of these companies are rushing in to get some of dumb money (probably
not the correct phrase for this) floating around would it also mean these
companies aren't worth investing in?

~~~
jaxn
More like these are good companies that are ready to IPO and the window of
opportunity closes if there is a crash. So go now or go in 2+ years?

------
H8crilA
This is actually pretty normal, unless there has just been a crash:

[https://www.nasdaq.com/market-activity/ipos](https://www.nasdaq.com/market-
activity/ipos)

If you start studying the capital markets you'll quickly learn just how little
you've known about the economy before. Look at any object on your desk - know
how was that thing made? Someone out there has manufactured the thing, there
was a few if not a few dozen corporations involved.

~~~
jaxn
None of these seem to be listed on that page yet.

~~~
H8crilA
Because filing the form S-1 comes quite a bit before the actual start of
trading. S-1 is a prospectus, lets investors familiarize themselves with the
offering.

I'd also add that this is just NASDAQ. There's a lot of other exchanges across
the world.

~~~
computerphage
Though, obviously, offerings in other (foreign) markets won't necessarily file
S-1s because S-1 is a concept of the United States' Security and Exchange
Commission (SEC).

------
afpx
Have you seen the stock markets recently? Apple has market cap of 2 Trillion
dollars. Just a little piece of that will fuel a business's growth.

------
safeerm
Trying to take advantage of all the capital available and momentum in the
market. Same thing happened the couple years before the dotcom bust in 2000.

------
jaxn
Trying to cash out before capital gains taxes rise?

------
maps7
Is more public companies a good thing or not?

------
jarsin
Probably because tons of money can be taken off the table for all these over
pumped companies in the stock market and plowed into the hot new things.

------
vmception
SPACs are playing a huge part too.

------
znpy
Pump and dump, imho.

------
Lammy
I imagine trying to get them in before November 3rd

~~~
erikrep
What's the importance of that date?

~~~
josuepeq
That date is Election Day in the U.S. 1/3 of the US Senate, the entire US
House of Representatives, a slew of local and state races and ballot measures.
Also, at the top of the ticket is the election of a new (or perhaps not)
President.

------
humaniania
Trump's capital gains tax policies that have deprived our government of vital
revenue are increasingly likely to go away next year. Rich people have bribed
the Republican party for decades to make it so that "investment" income is
taxed at ~15% vs ~25% for the working person's hard earned income.

~~~
derision
There's no revenue to tax if your high tax rate pushes all the businesses away

------
treelovinhippie
They should be hidden from the homepage. I stopped visiting TechCrunch a very
long time ago when the majority of their posts became fundraising news.

------
scott31
No, whether something is on front page is not really affected by stock market
(though HN algorithm is closed so it may actually be, but unlikely). The main
reason is, someone shared link to S-1 and others upvoted it

