No matter how tempting it might seem, tech investors need to avoid making a huge mistake this summer.
We are anticipating a steady wave of IPO news over the next several months. You can expect Wall Street’s hype machine to be backing them in full force, but falling for the hoopla could lose you a lot of money.
Wall Street bankers note that firms going public in the US could bring in a cool $40 billion –a remarkable record for the summer months.
Let me explain. If you’ve followed along with me for even a short time then you know I generally tell retail investors to avoid initial public offerings (IPOs) at the open and I stand by that.
Fortunately, I have identified a unique leader with deep expertise in financing Silicon Valley startups that later go public.
We’re talking 30,000 pre-IPO firms to date with more on the way and the company just reported a 293% earnings gain.
Let me show you why this is a great way to invest in new tech firms with a stock set to have a big run…
Brand New Stocks
I’ve said it before and I’ll say it again: IPOs are a key ingredient in keeping a bull market going. It gets people excited, pulls money into markets, and gets stock prices moving.
Thus, this coming IPO wave is great news for the summer rally. Especially as it’s set to be the biggest IPO wave ever.
Last year, IPOs launching in June through August raised $32 billion. According to research firm Datalogic, which has data starting in 1995, that’s the biggest ever.
But this year’s summer months are set to eclipse even those numbers. According to bankers that spoke anonymously to the Wall Street Journal, these new IPOs could raise a total of $40 billion.
So it’s no surprise IPO bankers are busier than they’ve ever been, as companies like trading app Robinhood, Uber-competitor Didi Chuxing, and even Krispy Kreme are all set to go public.
But making money on these IPOs is harder than it sounds.
That’s because stocks are typically volatile in the early days and often drop sharply after the lockup period expires in six months and insiders can sell their shares.
In short, trading IPO in the early days, particularly on the first day of trading, usually offers more risk than reward.
But things are different for those early investors, those who were in long before the IPO, who bought at pennies on the dollar.
Now, it is possible for you to buy at pennies on the dollar as well, with all the potential for massively outsized gains that come with an opportunity like that.
Of course, finding the companies that can pay out ten times or more over the next few years instead of crashing is easier said than done. I’ll spare you the details right now, but you can see how to maximize your chances of amazing success with pre-IPO investing right here.
As for playing the record-breaking summer of IPOs that Wall Street is expecting, there’s a certain company I want to talk to you about today.
This lender has financed 30,000 startups, including some very famous ones like Airbnb Inc., Pinterest Inc., Cloudera Inc., and Ziprecruiter Inc..
In fact, 68% of all tech and life-science companies that IPOd in 2019 and had venture capital backing worked with this one company.
And in the first quarter of this year alone, the company made $364 million in warrant and stock gains as its startup clients went public through IPOs and SPACs.
In other words, investing in this company lets you profit from successful startups without having to risk trading IPO shares on the open market.
The Startup Bank
Given its track record of lending to successful startups, it’s probably no surprise that this company is a bank based in Silicon Valley.
The name? SVB Financial Group (SIVB).
“SVB” stands for, you guessed it, “Silicon Valley Bank.” Other than lending to Silicon Valley startups, SVB also helps startups with banking and connects them to venture capital investors.
But the bank doesn’t waste a good opportunity. SVB also counts those venture capital and private equity firms as clients too and offers private banking services for the Bay Area millionaires behind many of the most successful startups in the country.
In other words, SVB is the perfect play on a summer of startups going public. The bank is the source of a lot of the money and connections behind the lucrative startup scene in America, especially in tech and the life sciences.
SVB lends money to startups, runs their bank accounts, puts them in touch with the venture capital companies that invest in early-stage startups, and runs the banking for those venture capital companies too.
In fact, SVB even lends and invests in the venture capital companies themselves, so it profits from every stage of the startup process.
In fact, SVB’s venture capital investment arm, SVB Capital, has $6.4 billion in assets under management, including venture capital legend Sequoia Capital.
Sequoia has invested in well over 1,000 startups over the years, including such success stories as Apple Inc (AAPL), Alphabet Inc. (GOOGL), Nvidia Corp. (NVDA), PayPal Inc. (PYPL), LinkedIn, YouTube, and Instagram.
With SVB investing in, lending to and connecting startups with Sequoia, the synergy here is clear. Together, the companies are about to make a lot of money this summer.
A Head Start
In fact, the good times have already started for SVB. The bank’s first-quarter was its best ever, with earnings surging 293% from a year ago and every part of its business growing.
No wonder the stock has gone on a tear and is up 150% in the past year. But I still see a lot of upside ahead for both earnings and stock.
Given its earnings, I project that their profits per share will grow 28% a year. That means they should double in 2.5 years.
As you can see, SVB is a great way to build wealth for the long haul with a short-term boost likely in this summer’s IPO craze.
And there’s the added bonus of knowing you’re getting in on a steady stream of great innovation.
Cheers and good investing,
Michael A. Robinson