Can Acacia (ACIA) and Twilio (TWLO) handle more stock than is out there? These are the mighty test cases of tech right now, two companies with secondaries that could have been where their initial public offerings might have come if the darned market weren't so dissatisfied with tech coming in to 2016.
If you recall, when you look at the stocks of the vast majority of the high-flying internet, social, mobile, cloud and cybersecurity companies, you will see they peaked all the way back in 2014 and have been fighting to regain ground since then.
And then we got these two deals. They have been incredible. Twilio, which makes the infrastructure for so much of the backbone of the newer internet companies, like Uber and Airbnb and WhatsApp, has gone from $15 to $60, where we learned of last week's $400 million offering that has yet to price.
Acacia, which has a disruptive telecommunications business, is immensely profitable for an early growth company. It's gone from $23 to $109 before last week's 4.5 million share offering that was priced nine points in the hole. It spent the rest of the session trying to stay above that price, but ended flat, a slight disappointment given the discount people got on it.
Then again, 22% of Acacia's stock had been sold short. It looks to me that the shorts pressed their bet and didn't cover on the deal.
If that's the case, then Twilio could be uglier as 36% of the float is short.
Remember, these are both sliver deals, so it is what happens when you make the bargain with the banks that are known as opening pop creators.
I like both of these companies very much. But I think they will be heavy as the new stock is digested and the shorts weigh on them.
I say it might be a matter of time vs. price. Let these stocks settle down before you get aggressive. But I think they are still longer-term undervalued vs. their prospects, which offer ferocious growth and, in the case of Acacia, a pretty reasonable price. Then again, it is heavily dependent on some big Chinese customers.
Twilio's business is much more widespread. At the same time, it is faster growing, with a longer-lasting tail.