The number of unprofitable companies going public has hit 'tech bubble levels,' BAML says - Business Insider

The number of unprofitable initial public offerings has swelled to "tech bubble levels," according to a new report from Bank of America Merrill Lynch.

According to the firm's analysis, the proportion of unprofitable companies going public has reached 70%, the highest since the peak of tech-industry exceess roughly 20 years ago. This dynamic is shown in the chart below on both an earnings and EBITDA basis.Investors have poured money into unprofitable companies in recent years amid low interest rates and slow growth, according to BAML. But now theas 2019's once-booming initial public offering market begins to sputter.

"Recent IPO withdrawals could be a warning sign that investors are shifting focus to profitability amid macro concerns," BAML strategists said in note to clients on Monday. The firm continued: "The potential ripple effect could be significant — tech innovation has been one of the biggest deflationary factors and if companies start focusing more on profitability via pricing, we could start to see an upward pressure in inflation."

Talked about this last year. It's ' irrational exuberance' or deja vu all over again as Yogi Bera would call it.

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