Green Room specializes in business, market and technology readiness. Our clients are health tech companies with medical device and software products and investors interested in health technology. Our services enhance innovation, interoperability, growth and investment potential.
As entrepreneurs who aspire to either become a publicly traded company or be bought by one, understanding the dynamics of the public markets is fundamental to achieving your ultimate liquidity goal. It is one bookend of valuation.
This time of year there is a rush for parking spots for cash including cash itself before the end of year. Other than the IPO market this seems to be what we are seeing already, even though there is one more week of trading into options expiration that could provide some entertainment.
Like a train coasting uphill, last week the market’s momentum began to roll over and the speed of market ascent slowed. Contrast that to the IPO market, where DoorDash (DASH) and AirBnB (ABNB) came roaring to market. It’s still a momentum market.
The rush to tap the most massive liquidity pool ever seen supports our original thesis about stock prices in the pandemic including IPO’s and SPAC’s:
Stock prices = earnings + hope from vaccines + whole lotta money gotta go somewhere
In the cycles of most markets – this one arguably looking extreme in some cases now – there comes a point where there is more money than good ideas and sometimes more money than brains. After parking the cash, in more usual times the machines more or less take over with the skeleton holiday crew to sustain markets.
This past week the headline index results were SPY (-) 0.96%, QQQ (-) 1.20%, MDY (-) 0.19%, and IJR +0.20. Looking at the flows of cash, money market fund parking lots are filling up fast. Some money rotated back to treasuries and bonds. Unprecedented liquidity has to go somewhere. IPO’s and SPAC’s are sopping up excess liquidity now. As the old saying go, if you don’t know how money gets made (by you), don’t invest in it.
For an up-to-date analysis, see this week’s Healthcare Segment Scorecard below.
Relative performance expressed numerically on a scorecard creates a picture of price movement dynamics similar to charts but forces us to notice quantitative change. Although short-term price changes like daily prices are interesting and even shorter intervals are interesting to quants, algos and traders, most investors understand that when a trend begins to change, the longer the change persists the more sustaining the trend is likely to become.
Pharma ($DJUSPR) is worth a watch at the moment as it has now outperformed SPY for one month after underperforming for most of the last two years. On the chart there is a nascent breakout of price pattern. Large cap pharma’s that have contributed to outperformance over the month include mostly what you would surmise from Covid-19 action: Pfizer (PFE) + 12.66%, Lilly (LLY) + 11.12, Novartis (NVS) + 7.70%, J&J (JNJ) + 4.20%. By contrast, Moderna (MRNA) is + 90.36% over a month.
Zombie companies are companies that earn enough money to continue to operate and service debt but are unable to ever pay down the owed capital. They are basically insolvent but continue to exist even though there is no money to grow. Airlines over a long part of the history are great examples.
These are not zombies, but what is a company called that raises large amounts of money based only on a story and a promise? No product. No revenue. But a possible cure for cancer. We call them Biotechs ($DJUSBT).
If you are interested in investing in one of the 70 biotech IPO’s this year, be sure to know when you may see a return. The roulette wheel is spinning.
As I See It: Momentum declined last week and with net bullish sentiment is not a great setup for further gains short term. The indexes are overbought but not excessively so and appear to be internally correcting. The peak may have coincided with the two IPO’s this week that were extreme. Next market movers: momentum + pandemic + earnings.
December 14, 2020
Bob Teague, MD
Chief Medical Officer
Green Room Technologies
Send comments or questions to firstname.lastname@example.org
Leveraging technology to improve process and outcome, Bob’s career spans clinical practice and executive leadership in Fortune 50 enterprises and prominent healthcare institutions along with experience in the public markets and entrepreneurial startups.
Bob is board certified in Internal Medicine and Pulmonary Disease, practicing in the Texas Medical Center for 20 years, and has held leadership roles at Compaq, Dell, and Quorum Health Corporation.
His entrepreneurial experiences were financially successful enterprises that were transformative in their markets for respiratory home care, diabetes chronic care management, healthcare interoperability and Medicare Advantage risk management through transitional care and high risk patient management.
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