Whitney Tilson: 'I Think We Are In An IPO Bubble'

Whitney Tilson joined Benzinga’s PreMarket Prep morning show on Monday and he had some advice for traders considering red-hot IPO Beyond Meat Inc BYND, which is now up more than 500 percent from its IPO price in a little over a month.

“I’m not super familiar with the company. I think it’s an exciting new growth area, and like many exciting new growth areas, there are some hot IPOs. I have never bought an IPO in my life. I think we are in an IPO bubble,” Tilson said.

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Where Are The Profits?

He said today’s environment isn’t as crazy as the dot-com IPO bubble in the late 1990s, but roughly 90 percent of the recent IPOs aren’t profitable companies.

“That’s a pretty good barometer for how overheated the IPO market is and how badly investors are likely to get incinerated. Ninety percent is pretty close to the all-time historical high back in 1999. So my general advice to most people is you’re the last sucker coming into the poker table in any of these recent IPOs now, so avoid it like the plague,” Tilson said.

Tilson said it’s easy to cherry-pick success stories from the dot-com era like Alphabet, Inc. GOOG GOOGL and Amazon.com, Inc. AMZN, but it’s also easy to forget about recent IPO debacles like Blue Apron Holdings Inc APRN and GoPro Inc GPRO.

“Mathematically speaking, they’ve done studies and it’s the single worst place to invest. There is no surer way to lose money in any strategy than buying hot IPOs,” he said.

Better Alternatives

Instead of chasing the hottest tech IPOs, Tilson is bullish on big tech companies Amazon, Alphabet and Facebook, Inc. FB despite regulatory and political pressures.

“I think it’s important to distinguish between business headwinds and headline headwinds. The headlines are real about government investigations and regulatory scrutiny, which by the way I think is healthy for these companies,” he said.

“Over a multi-year period, I believe these stocks will follow their earnings trajectory, and the businesses are actually booming.”

Listen to Tilson's full interview in the video below: