Alibaba-Sized Hole Blown in Nasdaq 100

An amount roughly equal to the projected value of Alibaba Group has been wiped off from technology shares since the beginning of March.

Equity offerings are pouring in a market in which prices are more than 20% of what they were in 2007. This might result in a glut of shares and scarcity of owners.

New Offerings

Chinese e-commerce giant is planning the biggest ever public offer of shares having a market value which might be more than 95% of the S&P 500.

Embracing Capital

From January through April, over 180 companies offered shares. The number of companies offering additional shares was 317, including FireEye Inc. and Nielsen Holdings NV.

IPO Supply

During the last six years, IPOs bring weakness in the market.

In March 2008, when Visa Inc. offered $20 billion shares, the benchmark index dropped 0.6% that month. In November 2010, when General Motors Co. raised $18 billion, the S&P 500 declined 0.2%. In May 2012, when Facebook launched IPO, S&P 500 slid 6.3% in 8 months.

Liquidity Squeeze

The majority of money managers have already invested completely. Therefore in order to buy new IPO, they will free up amount which will result in weakness in the market.

Mitigating Factor

If supply shrinks and demand increases, price is the mitigating factor and price is increasing. From sideline, investors are entering the market.

Investors are shifting from IPOs to biotechnology and Internet shares which resulted in the S&P 500 to perform best in a year since 1997.