Bravo Chief, pointing out the inconsistencies of evil evil capitalism again.
(* Chief, I'm writing this to you in the secret mask mode that only you and I can read. You gotta tone it down, all that socialist musings can get you in trouble. The real deal is that there are few executives and too many workers. The solution is to make the workers executives and make the executives workers, then voila, there are too many executives, so their compensation have to be frozen and there are not enough workers to cause wage increases to be inflationary.
Wait a minute, that doesn't work, the workers used to be the executives --- so the real workers still get shaft. *)
(* If you really want to figure out why the Tech sector is so bearish, look at two aspects : IPO lockups and employee stock options.
#1. I'm starting to see a pattern of IPO lockups that releases shares MUCH bigger than initial float, in some cases taking over 100X (even 200X) of avg daily vol.
#2. If you look closely, you'll also find MANY tech companies with IPO < 3 yrs with generous employee stock options. Perhaps even some older companies who have to match these stock options to retain valuable employees.
In too many cases to count, you'll see that the value of the stock options vesting this year is much bigger than their annual earnings. One extreme case went so far that the value of their stock options vesting this year is 15x+ and climbing quickly. This number is also much bigger than their total historical sales combined since they became a public company. I didn't even look very hard, I'll bet good money that there are much more dramatic cases than the ones I happened to be looking at.
I suspect at some point, maybe later this year (possibly post-election), all of these will blow up in the shareholders' faces. At that point, when the angry shareholders talk to their brokers, what do you think will happen?
I read this thing this morning that probably applies.
....Claude Raines' character in "Casablanca." He expressed "shock! Shock!" that gambling was going on at Rick's Caf‚ as his winnings were slipped to him.
Good Eh?
Of course for the rest of us, these stocks become ticking time bombs, ripe for short-term plunder, but definitely no long term holds. In case of ipolockups, buying PUTs for the middle of the midpoint of their #shares/avg_daily_vol seems to be good hedges.
The answers are all there in ipolockup.com and the Form S8 filings from these companies. You only have to look to see how big of a problem this is.
This is why, until the tech companies stop doing these naughty things, it really does not pay to be long on some of these guys. They just don't deserve it.
*) |
