GARY: “I am bringing this up again for the umpteenth time…just in case some of you did not hear it before. THERE HAVE BEEN A BUNCH OF IPOs that have come out recently with no sales. Yes…no sales. They are mostly in the BIOTECH area. Very simply, we have seen this before. Whenever a group gets hot, the wonderful human beings at the investment banking firms will bring public anything that breathes…regardless of fundamentals. They did it in 99 with the .com and it seems they are going at it again. ZSPH,KITE,AGTC,RARE,KPTI are recent examples. There are many more. Just these 5 recent IPOs, added up together have NO SALES. I repeat…NO SALES. Yet…the market cap of these 5 names are $5 billion.
The main point is simple. Our studies of bear markets show that if…and we use the word “if” these days as we are never going to see a bear market again…but if a bear market ever occurs again, these stocks will drop markedly, some as much as 90-100%. Again, how do we know? Studies. Bear markets drop the curtains. Bear markets expose. Bear markets take the ridiculously valued to where they should be. When I started in this business, I was in penny stocks. The company I was at brought companies public at 5 cents/share with market caps of $3-5 million. Those companies had sales. In other words, the investment banks are just packaging crap better.
We are still in a bullish market. This means some of these names can continue higher. Some can go ridiculously higher. ICPT went from $70-$500 in days because of a successful trial. ZSPH just came public at $18…opened at $30 and is currently over $40. NO SALES. RARE was a $21 deal which immediately went to $69 before backing off. NO SALES.
We believe in the BIOTECH industry. We are all for it. Fabulous discoveries will come from some of the companies Some of these discoveries may cure the worst of diseases. We are not mentioning all this because of that. We are mentioning this as a word to the wise. We do not believe companies with no sales should necessarily be put into the public domain. There is too much risk. Yes, the prospectus of these companies outline these risks but in a hot market, risk goes out the window. It is when the market is no longer hot that one should be worried. Right now, there really is not much to worry about. But the curtains will eventually come down. Just don’t be the last one in.” YOU HAVE BEEN WARNED!