What we’re reading (5/16)
“Wall Street Is Heading Into A Summer From Hell — And Top Investors Say It's Going To Bring A Near-Biblical Reckoning To The Market” (Insider). “After years of inflating, it's becoming clear that the ‘everything bubble’ has burst. Since the start of 2022, the S&P 500 has fallen by more than 18%, and the tech-heavy Nasdaq is down almost 30%. A punishing combination of still hot inflation, hiked interest rates, war in Europe, lockdowns in China, unprofitable companies facing reality, and recession fears is making it clear that this isn't just a short-term drawdown — it's a pivotal shift for markets.”
“For Tech Startups, The Party Is Over” (Wall Street Journal). “Last year, e-commerce startup Thrasio LLC was expected to be valued at $10 billion or more in a funding deal that would have led to the four-year-old company going public. The deal didn’t happen, and Thrasio, which buys and aggregates retailers that sell on Amazon.com Inc., continues to burn through the more than $3.4 billion of debt and equity it had raised. In recent weeks Thrasio has cut close to 20% of its workforce, announced a new CEO, tapped the brakes on acquisitions and scaled back engineering projects, according to former employees and an internal company memo reviewed by The Wall Street Journal.”
“Bitcoin, NFTs, SPACs, Meme Stocks — All Those Pandemic Investment Darlings Are Crashing” (Los Angeles Times). “Over the last few weeks and months, almost every financial asset has come hurtling back to Earth after high-altitude flights…fad assets such as cryptocurrencies, nonfungible tokens (NFTs), blank-check companies (or SPACs), and meme stocks such as GameStop, have taken the biggest hits.”
“Crypto Plunge Exposes The Folly Of Taxing Unrealized Gains” (RealClear Markets). “[It’s been] a tough break for people with a great deal of exposure to the cryptocurrency market, but it would have been far tougher had they already had to pay taxes on gains that have since been wiped out. After all, someone who bought Bitcoin at its value of about $30,000 in July of 2021 would have ended the year with about $17,000 in unrealized gains per Bitcoin — “gains” which have since disappeared.”
“SPACs Are Sputtering. Desperate New Terms Could Send Them Into A Death Spiral.” (Institutional Investor). “The stock prices bear out the analysis. More than 300 companies that have gone public via SPAC mergers since the start of 2018 have averaged a loss of about 33 percent from the IPO price of the SPAC, versus an average loss of 2 percent for the 1,000 other companies that chose to go public through a traditional IPO as of mid-April, according to Renaissance Capital, which tracks IPOs. Compared with the S&P 500, which gained more than 50 percent during that time, the SPAC numbers are little short of a disaster.”
