The private IPO market is consumed by “FOMO” — the Fear Of Missing Out.

The private IPO market is consumed by “FOMO” — the Fear Of Missing Out.

One of the most profound changes in the investment landscape over the past 15 years has been the loss of a once-vibrant IPO market.

For example, when Amazon went public back in 1997, the company had a modest ~$500 million market valuation. Investors who bought into Amazon’s IPO took a lot of risk, but they also bought the possibility of a mind-boggling return. Two decades later, Amazon’s IPO investors have made 200-times their money.

When Facebook went public three years ago, meanwhile, it was so mature that its hyper-growth years were already behind it. The IPO valued Facebook at about $100 billion — 200-times Amazon’s IPO value. Now, with Facebook valued at $225 billion, Facebook’s IPO investors haven’t done badly — they’ve doubled their money — but they haven’t captured anything like the returns that Amazon’s IPO investors did.

This change has created a problem for professional public-market investors, like hedge funds and mutual funds.

This demand for growth investments, which has been exacerbated by a stagnant US economy and paltry revenue growth for most mature companies, has led to the creation of what is now described as the “private IPO market.”


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