• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

This Isn't What This Market Needs

A flood of supply in a nervous market isn't a good idea.
By JIM CRAMER Apr 01, 2015 | 07:20 AM EDT
Stocks quotes in this article: EBAY, SNTA, CHRS, TRIL, INSM, CERU, RPTP, ICPT, ESPR

Supply is the enemy of a bull market. Supply kills. Supply upended last year's bull at this time, and I am worried that it could do so again.

Let's start with the big dogs, the two large deals today: Go Daddy (GDDY), the money-losing web hosting company and Etsy (ETSY), the money-losing online crafts marketing site.

Both of these companies are long in the tooth and have generated substantial losses. Etsy's selling 16.7 million shares, hoping for a valuation of at least $1.78 billion for the Brooklyn-ased artisan version of Ebay (EBAY). I find this deal quizzical, because despite the immense losses this company has suffered, and a line in its prospectus saying "we have a history of operating losses and we may not achieve," CEO Chad Dickerson in a town hall two years ago said that the company has been profitable since 2009. Perhaps there are different degrees and shapes and sizes of profitability? Who knows. But I think this is the kind of deal that's very worrisome.

Then there's GoDaddy, which managed to raise $460 million in this IPO even as it, too, has generated gigantic losses of $143 million last year -- although that's certainly an improvement over 2013 when it dropped $200 million and 2012 when it dropped $279 million. Some might like that progression. I, personally, am uncomfortable with this deal, which has been kicking around for about a year before it's coming out to party this morning.

This line from the prospectus: "while we have experienced revenue growth over these periods, we may not be able to sustain or increase our growth or achieve profitability in the future on a consistent basis," does raise eyebrows for a company founded 18 years ago. Lots of those losses were generated from what some would regard as its series of infamous and sexist ad campaigns, specifically its lavish Super Bowl ads.

Now, these two deals wouldn't bother me all that much if they didn't come right on the heels of seven biotech offerings from seven companies that have lost varying degrees of money over multi-year periods.

Some of these deals are tiny, like the 22 million shares of Synta (SNTA), which is one of the popular small molecule companies, even as this one is an exception because it's down big this year. Its five years of losses haven't failed to entice buyers at a $1.75 price.

But Coherus Bioscience (CHRS) is capitalizing on its 87% gain for the year by raising $100 million. Why not? The company's a red-hot biosimilar enterprise, the new pseudo-generic rage on Wall Street. It's a done deal at $29, nicely in the hole from the last sale at $30.58, nice for a company with three straight years of loses.  

Or how about Trillium Therapeutics (TRIL), with a pricing of 1.52 million shares at $19.50, a small discount from the last sale of $20.23? Trillium's one of dozens of companies that have ridden the wave of immunotherapy for oncology. It's got six years of losses and no revenues, but it's up 124%, so why not strike when the iron is hot?

Insomed (INSM) is a $1.48 billion company specializing in orphan lung disorders with a stock up 34% for the year; all the better to offer 10 million shares at $20.65, not too big a discount from the last sale at $20.80. Maybe people are attracted by its eight years of steady losses?

Cerulean Pharma (CERU), another oncology fighter with some cardiovascular indications, is trying to raise $50 million capitalizing on its 44% rally this year. It only has three years of losses, and its small size -- $183 million -- might attract some bargain hunters.

Then there's Raptor Pharma (RPTP), with its $75 million offering. Why not? While this $752 million company's stock is only up 3.3%, it's got nine years of steady losses, so why not offer stock when there is a thirst for companies that fight neuro-degenerative diseases?

Finally, there's a big one, chronic liver disease specialist Intercept Pharma (ICPT) that's up 80% for the year despite five years of losses. This company, armed with some good studies, managed to pocket $338 million at a huge 200-point gain from where it was 15 months ago before its promising drug formulation was announced for non-alcohol cirrhosis of the liver.

All of these are on top of the 1.25 million secondary recently by Esperion (ESPR) at $100, after it released positive results for its anti-cholesterol pill. No one seemed to mind the four years of losses.

Taken one at a time, we shouldn't be concerned about these deals. But let's face it, the plethora makes it a flood, and a flood of supply isn't exactly what this uncertain market needs at this very precarious time. 

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | IPOs | Stocks

More from Stocks

Market Mistrust May Make for a Move Higher

James "Rev Shark" DePorre
May 26, 2022 4:41 PM EDT

This lack of faith in the market could help put more pressure on the upside, here's how.

When the Markets Are a Game of Risk, Keep This Fund in Your Quiver

Mark Abssy
May 26, 2022 3:15 PM EDT

This ETF manages risk in a nuanced way.

At Some Point, Commodities Find Balance, Too

Maleeha Bengali
May 26, 2022 2:23 PM EDT

Don't forget about the importance of timing and demand as we look at wild moves in oil from the Covid lows to now.

AbbVie's Correction Appears to Be Over: Here's Where the Stock Could Be Headed

Bruce Kamich
May 26, 2022 2:19 PM EDT

Should you be a buyer?

Why I Would Be a Buyer of United Microelectronics

Bruce Kamich
May 26, 2022 1:14 PM EDT

Take a look at this chipmaker's charts.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:46 PM EDT STEPHEN GUILFOYLE

    We're Shedding Some of This Holding on Strength

    Check out the Stocks Under $10 portfolio here!
  • 11:33 AM EDT PETER TCHIR

    Thoughts Ahead of the Fed Minutes

    Recent economic and earnings issues are convincing...
  • 02:24 PM EDT PAUL PRICE

    An Interesting Chart

    I'm betting heavily that stocks will be way up aga...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login