June 12, 2020
Image: Sami Keinänen, via Flickr
Good morning! This Friday, an academic explains what's going on with tech stocks, Palantir might finally IPO, and Robinhood investors have changed everything we know about bankruptcy. Want Index in your inbox each morning? Subscribe here.
As of 5:49 a.m. PDT: Nasdaq Futures: 1.48% | Euro 600: 1.18% | Nikkei: -0.75% | Hang Seng: -0.73%
When last week's not-as-bad-as-expected job numbers were released, something interesting happened to tech stocks: They dropped. And that move got me thinking about whether we can actually treat "tech stocks" as one single thing anymore.
But that's not the only reason. "There is one subtle difference between the previous utilities and the current utilities, which is a question about growth," Srivastava said.
That's helping the other group: small, higher-risk companies. Smaller tech companies can ride on Big Tech's coattails, even though they don't have nearly the same amount of stability. Investing in a small tech stock is "basically buying lottery tickets," Srivastava said: "I'm hoping that I will get sold out to a bigger giant."
But there are big problems. "COVID is a very bad crisis," Srivastava said. It's helping to fuel irrationality, where people label non-tech companies (like food delivery firms) as tech companies.
On Wednesday, Srivasta told me he was "at a loss to understand" the buoyant market. Yesterday, the NASDAQ plunged more than 5% — suggesting investors might have finally woken up, too.
Last month, Hertz filed for bankruptcy protection. Its stock tanked, obviously. But retail investors — many of whom have got sucked into trading thanks to Robinhood — decided that its cheap stock actually represented a bargain opportunity (I have a sneaking suspicion that most of them did not know that bankruptcy tends to wipe out equity holders). That influx of interest drove its stock back up: At one point, it was trading at almost double its pre-bankruptcy levels, just to give you a sense of how insane this all is. And in an unprecedented turn of events, Hertz is now looking to issue up to $1 billion in new shares, taking advantage of its nonsensical price to help restructure the company. Ahead of markets opening this morning, its shares were up 53%. When people said fintech would forever change finance, I'm not sure this is what they had in mind.
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