You may be sick of reading about the terrible news in the market by this point. Oh well! There will be more. If the barrage of negative news seems like a pile-on, keep in mind that TechCrunch compulsively covered the different excesses in the technology, startup, and venture capital industries in 2020 and 2021; failing to cover the party’s demise would be a grave mistake. Visit this page for a more comprehensive analysis of the slowdown and what, broadly speaking, dropping stock and cryptocurrency prices mean for businesses and unicorns. We will only discuss SaaS moving forward.
What is wrong with software firms? After COVID emerged onto the world arena, software businesses, as seen through the public subset of a broader cohort, had a truly remarkable run. Public software firms benefited from two factors: first, it became evident immediately that software would continue to sell, even during a recession; second, there was little to no growth in other sectors to invest in, thus money poured into computer companies.
In essence, this was the pandemic trade. Its collapse is having a similar impact in reverse to how it became a defining time for the valuation of tech stocks. The reverse has not been done. Still not. Tech stocks are demonstrating today that there are new depths to explore despite a big sell-off from their highs in November. This specific ETF follows the Bessemer Cloud Index, a collection of publicly traded software providers who conduct the majority of their operations via the cloud. The basket of equities dropped by 54 percent and change as of the time I wrote this letter, peaking at $65.51 a share.
Under normal market conditions, at least 80% of the total assets of the Fund (exclusive of collateral held from securities lending) should be invested in securities that are components of the Index and in investments having economic characteristics that are substantially equivalent to such components. The index’s purpose is to monitor the performance of newly listed public firms that mostly work with cloud computing software and services for consumers. It lacks diversity.