Just less than a year ago, on December 21st of 2018, an article in The Motley Fool listed the seven most anticipated IPOs of 2019. Here are the four companies that made it out the door, with the S&P 500 for comparison. Slack is down 56%, Uber is down 55%, Pinterest down 47% and Lyft down 40%. Note, of course, that these are declines in a rising market.

The companies that were highlighted in the article but did not make a public debut in 2019? WeWork (in free-fall), AirBnB (in trouble), and Palantir (the, uh, usual).

The graph is gruesome, but the general trend should not be regarded as unexpected. Several years back institutional investors and prominently large mutual funds made a large strategic shift (which we noted). They believed — correctly at the time — that private equity investors were seeing better returns than public equity investors, and they wanted to start investing in advance of public offerings, instead of as part of the riff-raff of retail investors both at and after an IPO.

So they jumped to the other side of the IPO fence and started making late-stage investments: here is a helpful (if overly optimistic) summary from 2017. Just from our anticipated seven company IPO list, Fidelity Investments bought into Uber, Airbnb and Pinterest, and T. Rowe Price bought into WeWork (both made lots of other bets). This interest in later-stage assets was not just mutual funds, but sovereign wealth funds, Softbank’s vision fund, Singapore's Temasek Holdings, big PE firms like Tiger Global, and large VCs (A13Z’s $2 billion fund is a prime example).

The surge of late-stage money, combined with fewer companies going public over a longer time horizon had a pretty clear implication. Demand increased, supply shrunk, and unsurprisingly late-stage valuations surged. Many of these late-stage investors then pushed for, and often got, IPO prices that were in excess (or close to) their previous funding rounds. Exuberance, particularly in a closed community, is a powerful elixer.

Even in financial markets, however, all parties must end. There has been a lot written on the most notorious of these funds have taken hits. But given the opaque and distorted ability to really understand internal fund economics, and understanding that the average, by definition, will not be the outlier that attracts media attention (yes, I mean you, SoftBank), it’s a little hard to really know how it all works out. By example, T. Rowe Price seems to be doing just fine (with equities facing “modest outflows’).

The tough message here though, is that once again, retail security buyers on the public side of the IPO fence took an ice bath. Superior returns in the investing world have long depended on information asymmetry and privileged access, and those deficiencies are becoming more pronounced for investors who choose the public side of the fence while waiting on an IPO. It’s increasingly a dangerous place.