Anchors Away

Long before the internet bubble, synthetic CDOs, asset-swapping convertibles and high-frequency front-running, the sexy strategy which added numerous zeros to many-a-skeptical portfolio manager's trust fund was the dull but reliable strategy of shorting IPOs. This used to rank near the top of tried and trusty ways to, in a rare pursuit, beat the house. After all, there never was any satisfactory justification for for the 2x to 4x-plus valuation leap between final VC financing rounds and the lipsticked-pig's tarted-up presentation to the public at-large as a listed entity. Of course, we realize, now, from indictments, accusations, kiss-and-tells, e-mail records seized by public prosecutors that even the nutty interlude was for the most part, not Salem-like, ergot-induced mass-delusion, but careful (and admittedly artful) manipulation and orchestration by the underwriting puppeteers - one which assured  (no pun intended)  that the ass of any shorts (besides the underwriter hisself and perhaps a few cronies), was blue, bluer and bluest. Masterful, yes, but not sufficiently discreet to pass my muster. And yes, some, with strong constitutions, deep pockets, low leverage, and locked-in investors, did manage a large when the lightwave phenomena was finally extinguished.

Japan, aside from a precious few small-float growth issues, has remained proverbial fertile ground for new-issue skeptics - right up to today. Take, for instance, the much trumpeted $11bn dollar demutualization listing of century-old Dai-Ichi Life in April of this year. One would be forgiven for confusing chart (above left) with a ship's anchor, so relentlessly has it plummeted. I am certain you can imagine other metaphors (a skydiver, a sugar-cube sinking in a cup of mint-tea, or a twirly-whirly-gig falling from an oak tree). Nonetheless, despite the number of like-behaving IPOs, they (whoever "they" may be, though "they" is likely the people of Japan via their pension fund managers) have, over the years, kept coming back for more. Perhaps the repeated humiliation is as pleasant as playing a familiar video game, or cycling the same course. Unlike other pursuits, familiarity apparently doesn't breed contempt, and so Dai-Ichi was miraculously able to flog a reasonable slug of stock at YEN 170,000, sure in their knowledge of the ire and contempt investors might soon hold them.

So, here we now sit in mid-August - deep in summer lethargy, which is perhaps an apt time to ponder whether or not"they" have been punished enough. Perhaps those who took a flyer on it, have now all flown. And just as the moon has its reliable phases, perhaps the shorts too must soon cover. For those opportunistic folk didn't fund their trust funds holding out for the Rapture...