This market owes a big debt to Casper (CSPR) , the unfriendly IPO. The total collapse of this initial public offering will sideline a lot of crummy, money-losing deals for a few months and this, and the possible catastrophe that is Airbnb in a coronavirus world, could keep the supply of stock tight, giving the high fliers some room to run.
Some people ask me what is really propelling the market. The lazy-minded people just say the Fed. It's easy. It always sounds smart. It requires no intellectual inquiry, but it works and they can always back it up with facts and figures.
Others cite President Trump and his anything-goes pro-business attitude. Again, I think the president is more hell-bent on stopping China -- something I agree with -- than creating businesses. Formation is not his thing and his agencies are exhibiting a populist bias against our best companies. Witness this ill-fated, silly Federal Trade Commission (FTC) investigation of Apple (AAPL) , Facebook (FB) , Microsoft (MSFT) and Alphabet/Google (GOOGL) . As someone who has repeatedly castigated these companies for not making more deals, the inquiry seems more like a canard to make the government look good and these companies look bad. I am calling the whole thing stillborn. These are the companies that are world leaders. Let them alone already, as they will be post-election.
Still others say it is all earnings, which have been pretty good, but only expectations. And finally we get the "only game in town" folks who judge stocks against interest rates, which is fine except the stocks that are doing fabulously don't pay much in the way of dividends that are competitive with bonds, although as long-dated assets they shape up pretty well.
And the bankers can't seem to pump out more demand.
Which brings me back to Casper Sleep. Here's a deal that is almost surreal with how horrible it was.
First, there was really no demand anywhere. The foolish bankers started the range at $17 to $19. There was no interest whatsoever there. It then went to $12 to $13, where there was also no demand but the bankers forced it anyway in a moment of pure desperation.
Having done these kinds of deals myself, both from the sell side and from the client side, I can tell you there is a momentum to these deals. The bankers start the process and whoever picked $17 to $19 is truly a legendary Wall Street funnyman. The client either desperately needed the money and felt the competition breathing down its neck --something that wasn't talked about but is abundant -- or it was just so stupidly handled that it couldn't be stopped. It should have been.
It ended up being a horrendous down road as it was valued at $1.1 billion as recently as the spring of 2019. Now it is a laughable $400 million.
I question if it should be that high. Despite endless buzzwords about disrupting an industry with a great go-to market strategy that's personalized and direct to the consumer, it's a darned mattress company, maybe the worst home category there is. Just ask Mattress Firm, the biggest and the worst. You've got Tempur Sealy (TPX) , Purple (PRPL) , Leesa and Serta's Tuft & Needle, all of which have as compelling or more compelling stories or lower prices than Casper.
Casper, in the end, was one of the greatest productions since, well, "The Producers," taking in a huge number of investors in fatuous private rounds, including Target TGT, of all places, at a completely deluded amount.
Which bring me back to the overall market. If this deal had worked we would have seen a dozen more of these unicorns that are money-losing with no path to profitability. That would take away capital from the Workdays (WDAY) and the Coupas (COUP) and the Adobes (ADBE) . It would create a loose environment, no discipline, something that, without a lot of new money coming in, could have crushed this market. It would, in the end, gut the market.
Instead, somewhere in the bowels of the syndicate desks, there are discussions with unicorn CEOs saying unless you have a path to profitability like Uber (UBER) right now, we don't want your deals. We can't hurt the buy side like we made them be hurt on this one.
So thank you, Casper, for doing a deal that no one liked in a category littered with failures; you are giving this market a nice breather. Oh, and for the record, the bed's nice. I bet it even has some technology to it. Just like everybody else!