Reuters Insider - Why Fitbit Won't IPO, and Apple Stock is a Buy
18/08/2016 22:50
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Source: Thomson Reuters
Description: Financial advisor Jennifer Ellison explains why
big companies such as Fitbit, Uber, and others are
staying private. While she's worried about some
inflated valuations, Apple looks like a bargain.
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Short Link: http://reut.rs/2bl527R
Transcript (May be auto-generated)
Where have all the tech IPOs gone? I'm Jack Otter, Editor of Barrons.com. I'm
here with Jennifer Ellison who is Principal at BOS Wealth Management. You're
right in the heart of Silicon Valley so you kind of got an insider's view. Let's
start with this main question – we're just not seeing a lot of IPOs. They're
all kind of baking in that pre-IPO stage and not going anywhere. Yes, that's
true. I think it's a combination of a market that's been flat for over a year
now which doesn't really entice companies to go public because they're worried
they're not going to get the valuations that they want, coupled with the fact
that some of the companies– many of the companies that have gone IPO in the
last year the stocks have not done well. So it's just- you know, for companies
who can't afford to not go public and stay private for awhile, that's the
decision they appear to be making. There's a lot of talk of the unicorns that
aren't so rare anymore – these $1 billion+ private companies. And it's almost
a bubble, if I can use that word, in private equity where so much money is
poured in and now they might not be worth that. Yes, and this is a cyclical
thing, right? So we had these in the late '90s where you had a lot of tech
companies both pre-IPO and IPO companies that went public, valuations were
astronomical. And then, we had the decline from all of that. We've gone through
another period where valuations have increased pretty astronomically,
particularly for some of the unicorns that you mentioned, and these are cycles
so trees can't continue growing in the skies. So I think we're definitely seeing
a pullback both in valuations as well as obviously the stock prices of many of
the public companies. You even know that Fitbit, at its IPO, was value at less
than its last round of private financing. That's right, yes, which is not really
a good sign. So on the other side of the coin, are you seeing any value in tech?
Are there areas that seem to be undervalued? There are definitely. I mean tech
valuations are not as high as they certainly were when we had the last bubble.
We used to see valuations in companies like Apple, who has a P/E of around 9 or
10 these days, there's a pretty low valuation for still a growing successful
company. On the flipside, we still have a lot of companies that have no earnings
so you can't calculate a P/E and have pretty high prices. So your client base
includes people who work in tech, attorney who advise people in tech. What's the
mood? Can you give us any insider's views here? Yes, I think the mood has gotten
a lot more cautious. There is a lot more concern about valuations. I think it
iss taking- we are seeing fewer and fewer IPOs and companies coming to market,
so that makes everybody a little bit nervous. What are the trends in tech right
now? Well, so the trends have really been not the innovation of new things we
have to have, the items that we're all going to go out and buy but more of this
change to the share economy where you've got a lot more applications being built
to deliver services in a different way rather than gadgets being built that we
all have to go out and purchase. But they're old services, right? Old services
like a taxi cab, right? So it's just a different way of delivering what we've
had all along. Until there's a game-changer maybe these valuations won't go any
higher. It's possible. There's not a lot you can point-to to see how that's
going to be pushed higher at this point. Investors are definitely nervous.
Thanks very much, Jennifer. Thank you