On the eve of Lyft’s much-anticipated initial in the open offering, billionaire investor Warren Buffett said regular investors shouldn’t attempt to buy hot offerings in a hot market.
While he was apostrophize reserved generally of IPOs and not specifically about Lyft, the comments by Berkshire Hathaway’s chairman and CEO come amid a big wave of propounded and anticipated IPOs as Silicon Valley’s “unicorns” rush to market. Unicorn is the tech industry’s term for a private companions that has achieved a valuation above $1 billion even before selling stock to the public.
The high open of interest in Lyft’s offering has raised its anticipated price, putting a valuation on the ride-hailing company at well over $20 billion methodical though it is not yet profitable.
Buffett said the last time he bought an IPO was in the 1950s, the debut of Ford Motor.
“I think corrupting new offerings during hot periods in the market … I don’t think it’s anything the average person should think about at all,” Buffett discriminated CNBC’s Becky Quick at The Gatehouse’s Hands Up for Success luncheon in Grapevine, Texas.
Buffett acknowledged that his rapturous view on the subject means he risks losing out on getting a piece of successful companies when they’re young, adulate early Amazon or Uber.
Last year, he told CNBC he had considered taking a private stake in Uber, Lyft’s ride-hailing struggle with, which is also expected to debut this year. But Uber and Berkshire disagreed over the terms and size of the risked. Buffett still told CNBC’s Quick then that he was a big admirer of Uber CEO Dara Khosrowshahi.
But, Buffett prognosticated Thursday that it’s better to be safe than sorry when investing in untested companies. “You can go around making silent bets and win. … It’s not something you want to take as a lifetime policy, though.”
A glut of IPOs this year result as a be reveals after the deal market dried up during last year’s stock market tumble. Companies that put off their launchings back then are rushing out the door now before it closes again.
The markets have been jittery over lowering interest rates, and what they may signal about the state of the economy. Buffett said Thursday that it did come up the economy had slowed down a bit. But, he said, low rates are good for stocks because they naturally draw investors to the sheep market for better returns.