Thursday, March 5, 2015

Mark Cuban On The Lack Of Liquidity In Technology & Real Estate Funds

On his website last night Mark Cuban (billionnaire owner of the Dallas Mavericks professional basketball team and star of the Shark Tank television show) unleashed a summary of: Why This Tech Bubble Is Worse Than The Tech Bubble Of 2000. The key word; liquidity.

"They may have been horrible companies (the 2000 tech companies), but being public meant that investors had liquidity to sell their stocksThe bubble today comes from private investors who are investing in apps and small tech companiesI have absolutely not doubt in my mind that most of these individual Angels and crowd funders are currently under water in their investments. Absolutely none. I say most. The percentage could be higher. Why?


Because there is ZERO liquidity for any of those investments. None. Zero. Zip.  
All those Angel investments in all those apps and startups.  All that crowdfunded equity. All in search of their unicorn because the only real salvation right now is an exit or cash pay out from operations.  The SEC made sure that there is no market for any of these companies to go public and create liquidity for their Angels.  The market for sub 25mm dollar raises is effectively dead. So why is this bubble far worse than the tech bubble of 2000 ?
Because the only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity. If stock in a company is worth what somebody will pay for it, what is the stock of a company worth when there is no place to sell it?"
As the euphoria in the financial markets continues to build steam you will begin to see more and more speculative "investment options" for Mom and Pop. Mark describes the $5,000 "put your money in and get rich in a few years" technology funds above, but the same type of funds are popping up once again in the real estate markets. In fact, one of them was on the most reason season of Shark Tank where Cuban had the opportunity to provide his thoughts on the investment. It was not pretty:



When things turn ugly, which they soon will, investors will have no access to their money.

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