Saturday, March 2, 2024
Hometrader talkBig Box IPO draws out market's hecklers, and Mark Cuban

Big Box IPO draws out market’s hecklers, and Mark Cuban

The initial public offering (IPO) rush is generating lots of sarcasm. When online storage company Box announced that they had filed for an IPO last night, it was immediately noted that the company had a $168.6 million loss for the fiscal year ending in January. That's not far from the $250 million the company is seeking to raise in its IPO.

Much of the loss was due to the cost of acquiring new customers, and of course most companies are not profitable when they first go public.

That, however But Mark Cuban, never one to shy away from a sharp comment, immediately tweeted this out:

Mark Cuban tweet

His criticism isn't really new. Aggressive spending for new customers has been justified by start-ups for years. Most say that the initial expense is offset by the many years of subscription services that new customers generate.

Meanwhile, investors have been happy to buy into this—they've done it for companies like Salesforce—at least so far.


1) Weakness emerging in former market leaders. While much has been made of the double-digit declines in previously hot biotech stocks this month, several other leading sectors have seen notable declines: China internet stocks, U.S. homebuilders, and cloud/web hosting companies.

a) The concerns about slowing growth in China have weighed on China internet stocks:

China internets in March

Name Percent decline

Youku -16 percent

Renren -11 percent -9 percent

Baidu -7 percent

b) Meanwhile, many cloud-based companies are suffering the same fate. For sure, they've had huge runs—Workday went public 18 months ago and is up more than 100 percent since then, even with the March slide. Veeva went public less than 6 months ago, priced at $20, went almost to $50, and is now back to $27….still up, but well off the highs.

Cloud/web hosting in March

Name Percent decline

Veeva -22 percent

NetSuite -16 percent

Workday -13 percent

Rackspace -11 percent -9 percent

This is important, because we are in the middle of a very large run of cloud-based IPOs. This week two cloud-based companies are seeking to go public: 2U, a cloud-based platform for online degrees, and Aerohive Networks, a cloud-based mobile network platform for businesses.

c) Homebuilders were early leaders this year, but there have been concerns on the health of the spring buying season. Many reported orders that were down year over year, though there were a few exceptions.

Rising rates haven't helped. Jack Micenko at Susquehanna and others have also noted the seasonality of these companies: they tend to have their best run from November to April.

Builders in March

Name Percent decline

Hovnanian -21 percent

KB Home -16 percent

Ryland -16 percent

DR Horton -13 percent

By CNBC's Bob Pisani

- Advertisment -

Most Popular