If you believe, as I do, that you can't have a recharging in the big growth tech and biotech names until the IPO market cools, because there's only so much money going around, you have to be heartened by the after-market performance of the cloud, big data and early-stage tech IPOs, because almost all of them are now down huge from their highs, and most are very weak today.
That's crucial to my thesis that this IPO window must close, because it is killing the established players as hedge and momentum funds pile out of those and go into these deals.
You need to have more fear in the IPOs, and that's what King has done. That's what the after-market collapse of the last deals has done. You need to have more fear of the hydrogen plays. That is why Plug Power (PLUG) is selling off, because of an injudicious release from the company that it may win a big order in a couple of weeks. Believe me, that's not how qualified CEOs announce news.
There are many established cloud plays that can't get their footing as sellers continue to dominate the cloud stocks. Today is Workday's (WDAY) day to go through the stock thresher. Concur Technologies (CNQR) is getting whacked again, as is Salesforce.com (CRM). There's just too much stock sloshing around from insiders everywhere to make them stabilize, plus portfolio managers are clamoring for low growth at a reasonable price, not ultra-high growth at a very high price.[Read: Mobile Apps are Often Wide-Open Security Traps] The Facebook (FB) acquisition of some wacko virtual game helmet for a couple of billion is leaving a lot of people cold too, because it, like King, is a reminder of yesteryear, where anything goes. Now I happen to think that you are betting against Mark Zuckerberg when you bet against this acquisition. That has been a crummy bet since the company figured out digital handhelds when the stock was in the low $20s, but it's been a real good short bet since WhatsApp. Zuckerberg has lost the trust of some of the new shareholder base, all part of the froth-to-flatness conversion. Meanwhile, the established biotech stocks are attempting to rally, but they are by no means out of the woods, and it looks like Gilead (GILD), Biogen Idec (BIIB) and Celgene (CELG) are ready to resume their swoon. This collapse is part of a necessary process that leads to the end of the rotation from growth to value. For the longest period, new supply was lacking, mostly because of big stock buybacks and conservatively priced IPOs of real businesses that were snapped up by long-termers. But now the insiders and the IPOs are tipping this market into selloff mode, because there is too much supply. If you close the IPO window, the same sellers will turn buyers. That makes King the beginning of the end. The end will take a while. There are still red-hot deals such as GrubHub and Box to come. But as skepticism builds about new merchandise, the old growth merchandise will come back in vogue. Not yet. Not yet. At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long CELG and FB.
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