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Almost half of auditor warnings about potential failure are on IPOs
This reinforces what I have been saying about biotech startups and the game they are playing with VCs unloading startup risks on the greater fools in capital markets. Half the companies in that list are small biotechs along with others that have shady business models. Fortunately, these things peaked in 2014 and the market meltdown will clean out more of it.
And if you think this concern is overblown, see what is happening to ALKS today that is bringing down the entire sector. We all contribute to the greater fools market when we blindly keep buying broad ETFs and mutual funds in narrow sectors.
To add insult to injury insiders and/or people with inside information often trade out of these things before the trial results or FDA approvals become public and all that the rest see is something like this a few days before this meltdown. SEC typically does nothing.
@vht Thank you; and yes, saw the ALKS melt, too, We don't have any health sector monies there. But, as you noted, ALKS is banging the sector in general. Regards, Catch
@vht Oh, I don't dismiss what you have noted. Being invested in etf's or active managed broad-based funds does not allow me/us to be totally selective, eh?
Our direct/single company exposure in the health area is with DPLO (Diplomat Pharmacy) and ABC (Amerisource-Bergen), with the remainder in healthcare related in FHLC, FSPHX and PRHSX.
@catch22, apologies. That last post wasn't directed at you while it looks like it in retrospect. I was still composing it when you posted your note and so hadn't seen it. It was part of my continued rant on what is going on in this sector.
The biggest single fund owner of this junk stock is not even a health care fund or etf. Many small/mid cap funds have become proxies for biotech sector which is why the small caps went up yesterday.
Qualitatively, this is exactly the same principle as what happened with the securitized mortgages. Demand from the naive investors looking for yield, pressured more and more of lower quality to be originated and included in the basket. Until the baskets got filled with too many toxic securities from this lax curation that fed on itself. Same thing might happen qualitatively in health care sector if not as much of a market breakdown in numbers.
Mutual funds and ETFs serve the same purpose. As more and more capital flows in chasing returns as it did in BioTech, it encourages the VCs and underwriting banks to bring lower and lower quality (riskier) companies to public markets (earlier I had posted a thread about a payday lender startup doing an IPO warning that they may not even be legal in their prospectus). Everyone thinks because they are a small part of these billion dollar+ funds, failures won't hurt or be noticed by anyone... until these funds gather enough of them and they all start to fail together in falling markets.
I am not entirely unhappy. This huge transfer of wealth to the Bay Area from retail investors has been great for the local economy except for the ones still holding when the music stops.
May be the investors in this forum are smarter and didn't go chasing biotechs based on how they did from the high-flying days of 2014 and won't be left holding toxic baskets in 2016.
Comments
https://www.equities.com/news/alkermes-plc-alks-is-trading-lower-on-unusual-volume-for-january-18
Thank you; and yes, saw the ALKS melt, too, We don't have any health sector monies there. But, as you noted, ALKS is banging the sector in general.
Regards,
Catch
http://investors.morningstar.com/ownership/shareholders-major.html?t=ALKS®ion=usa&culture=en-US&ownerCountry=USA
If you are in any of these funds, congratulations. You have been playing VC for a while.
Oh, I don't dismiss what you have noted. Being invested in etf's or active managed broad-based funds does not allow me/us to be totally selective, eh?
Our direct/single company exposure in the health area is with DPLO (Diplomat Pharmacy) and ABC (Amerisource-Bergen), with the remainder in healthcare related in FHLC, FSPHX and PRHSX.
The biggest single fund owner of this junk stock is not even a health care fund or etf. Many small/mid cap funds have become proxies for biotech sector which is why the small caps went up yesterday.
Qualitatively, this is exactly the same principle as what happened with the securitized mortgages. Demand from the naive investors looking for yield, pressured more and more of lower quality to be originated and included in the basket. Until the baskets got filled with too many toxic securities from this lax curation that fed on itself. Same thing might happen qualitatively in health care sector if not as much of a market breakdown in numbers.
Mutual funds and ETFs serve the same purpose. As more and more capital flows in chasing returns as it did in BioTech, it encourages the VCs and underwriting banks to bring lower and lower quality (riskier) companies to public markets (earlier I had posted a thread about a payday lender startup doing an IPO warning that they may not even be legal in their prospectus). Everyone thinks because they are a small part of these billion dollar+ funds, failures won't hurt or be noticed by anyone... until these funds gather enough of them and they all start to fail together in falling markets.
I am not entirely unhappy. This huge transfer of wealth to the Bay Area from retail investors has been great for the local economy except for the ones still holding when the music stops.
May be the investors in this forum are smarter and didn't go chasing biotechs based on how they did from the high-flying days of 2014 and won't be left holding toxic baskets in 2016.