Ruminations on the Recent Rally
In general, small tech stocks have been in a bull market since May 2005, and the acceleration to nearly asymptotic has been dramatic since and important low marked in mid-October.
But all is not what nano-hype artists would have you believe.
Look at a chart of the SMH (semiconductor ETF) or the BBH (biotech ETF) or the SPLY (technology index) OR EVEN THE SPX (the bloomin' S&P!! for goshsakes)!
They've ALL followed the EXACT SAME PATTERN.
In other words, this is NOT a small technology phenomena at all. It is a TOTAL STOCK MARKET RALLY.
Fact is, investments in gold stocks, oil stocks and even stock brokerage stocks all look almost identical to so-called nanotech stocks.
Don't get so excited. The end is near. Look for another possible 4-9% upmove from here before the crying begins. I see a 10 - 16% decline in small technology stocks from CURRENT prices, in calendar 2006, as JUST the first landing place of a 6-30 month bear market.
The Open IPO Window Was Yesterday
"Don't it always seem to go, that you don't know what you've got 'til it's gone?" said Joni Mitchell
They say that last quarter 2005 produced the lowest number of IPOs in ages, and that plans for new issues the first half of 2006 were even worse. This is very bad news for small tech companies thinking of going public in the second half of 2006.
Today, Jan 11, 2006 - Look at the Biotech Indices and the BBH ETF - Look at the Semi ETF, SMH. (and REALLY take a close look at all the nanotechnology indices' charts - they've gone asymptotic!) A significant percentage of public and private small technology companies are in these two spaces - and those sectors are doing GREAT . . . today.
Emerging nanotech company CEOs, executives, their VCs and investment bankers should have been ready "to go" . . . today (or over the next month or two). Unfortunately, they were waiting for the IPO Window to open - - well, it's open NOW. Their waiting is wrongheaded and will cost them later this year as this tech rally begins to collapse over the next few months.
The late nineties are over. What people don't "get" is that times like that never happened before, and will never happen again. (hey . . . never is a long long time, so don't hold me to this in 2022 . . . but in the lifetime of a stock market participant (say, 20-50 years . . ), NEVER is the right word.
In the real world that doesn't include the late 1990s, IPO windows open and shut VERY quickly, and that's the world we live in today.
As I cautioned publicly in May 2004, Nanosys' opportunity was in September to November of 2004 - only after a successful Google IPO. No comment on Nanosys as a business or stock, but see how much better it would have been to announce an offering Nov 15, 2004 (with Google having already more than doubled!) . . . instead of being aborted in the summer?
You really don't know what you've got til it's gone. And this woulda, coulda, shoulda been the best opportunity to launch a successful nano or small tech-related IPO since November of 2004 . . . but did (will?) anyone do it? . . . nahhhhhhhh.
Will they be sorry they weren't ready to go now "come" May to November 2006? absolutely.
NanoNews That Doesn't Make Us Go "Yippeee!"
We got two pieces of news in nanoland the other week that made us go "oy vey." (a distressed yiddishism that has a million meanings; in this case, "get me the heck outta here.")
First, TINY (Harris & Harris) issued a "deemed" dividend of about $1.12 per share. There's good news and bad news. The good news is they're not actually paying the money to shareholders; the dividend is only "deemed" to have been given. What sense would it make to pay the money out to investors? The shareholders want the company to invest the cash in small tech companies in the hopes of making VC-type profits. They don't want their money "back."
The bad news is they're not actually paying the money to shareholders; the dividend is only "deemed" to have been given. Hey, not getting the money, but still having to pay taxes on it as if you had, is NOT FUN. Now, the board of directors of TINY is not to blame for this mess. They inherited the BDC formula which the company has been wedded to by law. Unfortunately, for nanoland news and the investors in this stock, the whammy of the BDC hits the company's pocketbook, the shareholders' (although a higher stock basis may lessen future taxes) pocketbooks and focuses attention on the drawbacks of this model. VCs, for example, have much more freedom, much more privacy of action (the BDC is "public" afterall) and a more straightforward tax regime.
My fellow blogger, Steve Edwards, beat me to the punch on the second "oy vey" news issue in the recent past. His Jan 6 note hits most of the right keys by my lights. The ONLY reason he "won" the "race" is that I spent so much time last week struggling with how to say in a gentle way how weirded out I was that the Lux index had to go through a "rewrite" or "quarterly update" so soon after public launch. I am still mystified by Intel, Toyota, GM, NEC, et al. even being mentioned in the same breath as a "nano index". I still don't get it. Exchanging Toyota and Intel for GM and NEC strikes me as so much "arranging ashtrays on the deck of the Titanic". I know there's a supportable argument/explanation, and that there was a rigorous academic approach by Lux . . . but still I have to wonder: Are Steve and I the only ones scratching their heads?