IPOs: The chill finally set in, so when's the rally?

Last year at this time I ended up predicting that we'd see things cool down on the IPO side. Going into the third year of a sizzling series of initial public offerings from newly minted companies looked overheated and overwrought.

Initially, though, the market seemed completely indifferent to my thoughts on the subject (funny how that keeps happening) and steamed ahead with bigger and bigger valuations on less and less evidence of potential. Then, instead of a calm, rational slowdown, we got more of a head-on collision from the Hillary Tweet about you-know-who followed by a stunned stagger.

The big question now is whether we'll see a continued pause and a later, steadier rise or a prolonged lull. In an orderly world, we'd see solid, well run biotechs with real promise in big new fields like gene editing roll out with substantial investor support. But rational thought doesn't apply when it comes to predicting stock market activity. That Tweet was nothing but a wake-up call about all the risks associated with biotech, and they are extreme.

Generalists are out and the remaining biotech investors are getting more choosy, and after the last three years, the big question is what took so long. A big help here would be to see some of the younger immuno-oncology and gene therapy players make the grade on moving much closer to expected approvals. That's going to depend on hard data.

Promising innovation is fine. Now's the time to perform.

In the meantime, you'll see more IPOs from biotechs with few alternatives to raise funds. It's painful to think of the punishment awaiting those offerings. Desperation carries an unpleasant aroma on Wall Street. The sense of smell just got better over the last few months. -- John Carroll