The DoorDash (DASH) initial public offering has finally opened, and is trading around $187 after pricing at $102. The minute it opened, the indexes took a hit on what looked like some sort of algorithm. Many of the special purpose acquisition names fell in tandem as the S&P 500 traded to the low of the day. Market breadth has turned negative, but there are still quite a few names with sizable moves on the day.
Another huge IPO, Airbnb, opens Thursday, and that will soak up more liquidity. There is still plenty of cash out there that is looking for a place to go, but those big secondaries do put some pressure on the pockets of momentum. Nothing has driven this market more than the high level of liquidity and that is not going to go way very soon.
The DoorDash IPO is a windfall for investment banks and their clients. The company itself doesn't even receive the benefit of the strong demand for its stocks. It is a system that greatly benefits institutional Wall Street to the detriment of smaller investors. This is part of the reason that there is so much interest in the SPAC vehicles, as it provides a more even playing field for investors trying to buy a piece of a hot company.
IPO's aren't going to go away anytime soon, but anyone that takes a hard look at deals like DoorDash has to wonder if there is a better system, especially as individual investors are becoming a more powerful force once again.
This morning Bloomberg reported that strategists at JPMorgan predict that retail investors will inject around $550 billion into the market. These investors are typically shut out of hot IPOs, so where will that money go? Likely into some of the SPACs that are rolling out at a record pace.
The market is seeing some pressure as the DASH IPO soaks up attention and liquidity. I'll be looking for more entries into the SPAC names that should remain the best trading sector in this market.
