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Tags: Smith | bubble | IPO | market

Renaissance Capital's Smith: 'Signs of Bubble' Emerging in IPO Market

By    |   Wednesday, 26 March 2014 03:47 PM

The initial public offering market is getting frothy, but it's not as bad as during the dot.com bubble, says Kathleen Smith, principal of Renaissance Capital.

We're in "inning seven," she told CNBC. "We see signs of a bubble, but not nearly what we saw in 1999 or 2000."

Investors would do well to stay away from IPOs such as Wednesday's offering by King Digital Entertainment, maker of the video game "Candy Crush," Smith said. Instead, investors can participate in post-IPO trading.

Editor's Note: New Warning — Stocks on Verge of Major Collapse

"Those are special investors getting those calls" for IPOs, she said. "Most investors are not participating much in the IPO market. Investors should not be running in to buy these. They should watch them trade. They should make these a small part of their portfolio, and participate that way."

Renaissance manages an exchange-traded fund that consists of newly-public companies, Renaissance IPO ETF.

"We are at points in the market that are definitely frothy," Smith said. "Investors have been outperforming the overall market in post-IPO trading, and that's why we have such an exuberant market right now."

Ian D'Souza, a professor of behavioral finance at New York University, sees signs of a technology bubble.

"One of the great indicators of a bubble is when young companies are trying to access the capital markets in great quantities," he told BBC News. "We've seen a proliferation of these at an accelerating rate over the past six months."

Almost 75 percent of recent IPO companies are losing money, not far from the 80 percent level that prevailed prior to the 2000 stock market bust, D'Souza said.

Editor's Note: New Warning — Stocks on Verge of Major Collapse

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The initial public offering market is getting frothy, but it's not as bad as during the dot.com bubble, says Kathleen Smith, principal of Renaissance Capital.
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2014-47-26
Wednesday, 26 March 2014 03:47 PM
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