In the world of Wall Street, people are paid a salary, but the real money is in bonuses. Typically, the firms make money and pay a bonus from the profits. The bonus can be and often are more than your salary, the bonuses allow many to live a very good lifestyle. If the markets are not doing well, then bonuses suffer. Similar to most industries, every profitable industry has its profit centers and one of the profit centers of Wall Street is the IPO or Initial Public Offering. For the past 2 decades the IPO was an automatic profit center.
In an article by Mehnaz Yasmin and Akash Sriram of Reuters, the IPO market on the Nasdaq fell 80%. In 2021 743 companies raised over $180 billion. In 2022 156 companies raised $15 billion.
Companies go public for a wide variety of reasons, but one is people are willing to make a long-term investment as well as they can see a method to sell shares if they go higher than the IPO. To do this simple thing needs a rising market or a market that is generally going higher. In 2022, the Nasdaq index is down 28%. The S&P 500 index is down 16.2% and the Dow Jones Industrial Average index is down 6.5%.
The Nasdaq is heavily dependent on technology companies and that has been a very good thing, for technology IPOs form the bulk of US listings.
According to Nasdaq’s Chief Executive Adena Friedman, the lull will likely continue in the first quarter of 2023 and hopefully pick up in the 2nd quarter.
Linking to dividend paying stocks, Wall Street makes lots of money on IPOs and trading stocks, as a dividend holder you are not a profit center for Wall Street, but you can easily be a profit center for yourself. As long as your investments are making profits which can pay dividends you do not have to do anything. Your biggest decision is what do you do with the dividends? pay down debt? buy more of what you own? use a little to help Wall Street? those are good decisions to have to make. Remember you invest for you first, then Wall Street for the bulk of the stocks you will buy and sell there are many institutions buying and selling the stocks – there is a ready market for you.
There are more questions than answers, till the next time – to raising questions.