Angst has been the stock market story of late. It soars, it plunges, and all the while investors fret over sky high valuations and pour over data to figure out when inflation will bring the house of cards crashing down. But sometimes, like now, the problem is far simpler than that: too much supply and not enough demand.
Companies have raised over $170 billion through initial public offerings on U.S. exchanges in 2021, according to data compiled by Bloomberg. IPOs are so hot they’re on track to top last year’s $180 billion haul, the most since at least the 2008 financial crisis.
But while the market voraciously consumed 2020’s debuts, tastes are changing. The Renaissance IPO ETF (ticker IPO), which tracks newly public companies, is down 9.3% this year after soaring 107% in 2020. While the broader market has held up so far, there’s an ever-present threat of a seemingly endless equity supply overwhelming precious demand. Yes, the S&P 500 is up nearly 10% higher year-to-date. But it’s dropped almost 2% from the all-time high it reached earlier this month.