When it comes to ipo's you probably shouldn't listen to the talking heads because they can't seem to see future potential of the company better than you or your friends can.
Consider BIDU, back in 1995:
"Even with increased revenue and net income results for Q2 (around $8 million), this deal has got to have Benjamin Grahm rolling in his grave. Consider that CBS Marketwatch cited a IDC report as saying the entire China online ad market was $130 million in 2004. Now I think Baidu may surpass a $1.3 billion market cap by the end of first day of trading (China Net Investor: Baidu now has a market capitalization of $3.92 billion!), and if that happens, then I must say that I don't know of that many other companies that trade at 10x INDUSTRY revenues, even if the industry happens to be growing real fast."
Philip Lin, former executive at private equity firm, Kluge & Company; entrepreneur-in-residence at Kleiner Perkins
"You want me to talk about Baidu.com? OK. The stock, which climbed $95, or 354%, to $123.06 on its first day of trading Friday, trades at 1,000 times earnings. It trades at 128 times sales. You know what to do - SellSellSell!"
Jim Cramer on his "Mad Money" show
"This one is the return to the Internet bubble"
John Fitzgibbon, analyst in New York with IPODesktop.com
"Baidu.com's P-E ratio is sick"
Enzio Von Pfeil, chief executive of Commercial Economics Asia Ltd., who stressed he was speaking for himself and not his company.
"This is a `son-of-Google' investor mentality. Everyone remembers they could have had Google at $85 and don't want to let it happen again."
David Menlow, president of IPO Financial
"For the investor who thinks that Google or Yahoo are at a premium, how can you justify Baidu at even five times greater valuation than Google or Yahoo when it's only a China play?"
Martin Pyykkonen, managing director at money management firm Hoefer & Arnett
"It's a tsunami of retail interest. The guys doing the pricing priced it for the fund market and they didn't realize the huge wave of retail interest. And the retail investors don't have a clue about the valuation. (...) The whole online e-commerce market in China last year was $130 million. "So, [Baidu.com's market cap] is approaching 30 times the entire market in 2004. And it's just a regional market. Chinese is not the international language. People are buying the story that it's the second largest web site in China's growing market. But they forget it's very much a one-country wonder."
Francis Gaskin, editor of Los Angeles research firm IPOdesktop.com.
"I think the stock's rise is outrageous. This is another one of those bubbles. At the $27 offer price it was trading at 64 times sales. Even though its sales tripled last year, that doesn't justify a 64 price-to-sales ratio."
Fariborz Ghadar, director of the Center for Global Business Studies at Penn State University
"It's a speculative fever right now. It doesn't make any sense. But as we saw in previous bubbles, that doesn't mean it can't keep going and make people money in the short term as they profit off of the greater fool. But if you're a long-term trader looking for valuation and the worth of the business based on its general future profits and cash flows, this is a ridiculous price."
Raymond Lin, portfolio manager with Tricera Capital, a San Francisco hedge fund specializing in Asian markets
"Congrats to Baidu and their investors. But if I am Baidu, I am seriously pissed at my bankers. They left almost USD $100m of Baidu company money on the table. Either they were really incompetent in gauging investor demand, they decided rewarding their institutional accounts with an Internet bubble throwback freebie was more important, or they figured they needed to keep the raise relatively low to encourage future fundraising business by Baidu. The approximately USD $100m Baidu raised is chump change when you are competing in this market sector against Google, Yahoo and Microsoft."
Bill Bishop, CEO, Red Mushroom; Co-founder CBS MarketWatch
And what did some manly guy at the Motley Fool say about GOOG, back in 2004?
My take? If you personally use LinkedIn or know lots of people who use the site, then buy some shares. Don't go all-in, of course -- but buy some. Isn't this what investing is all about? You buy what you know and you buy the companies that make the products you use. So don't listen to the pundits on IPO's. They all go by valuations to make their usually negative calls. And aren't all IPO's overvalued by their very nature?
Consider BIDU, back in 1995:
"Even with increased revenue and net income results for Q2 (around $8 million), this deal has got to have Benjamin Grahm rolling in his grave. Consider that CBS Marketwatch cited a IDC report as saying the entire China online ad market was $130 million in 2004. Now I think Baidu may surpass a $1.3 billion market cap by the end of first day of trading (China Net Investor: Baidu now has a market capitalization of $3.92 billion!), and if that happens, then I must say that I don't know of that many other companies that trade at 10x INDUSTRY revenues, even if the industry happens to be growing real fast."
Philip Lin, former executive at private equity firm, Kluge & Company; entrepreneur-in-residence at Kleiner Perkins
"You want me to talk about Baidu.com? OK. The stock, which climbed $95, or 354%, to $123.06 on its first day of trading Friday, trades at 1,000 times earnings. It trades at 128 times sales. You know what to do - SellSellSell!"
Jim Cramer on his "Mad Money" show
"This one is the return to the Internet bubble"
John Fitzgibbon, analyst in New York with IPODesktop.com
"Baidu.com's P-E ratio is sick"
Enzio Von Pfeil, chief executive of Commercial Economics Asia Ltd., who stressed he was speaking for himself and not his company.
"This is a `son-of-Google' investor mentality. Everyone remembers they could have had Google at $85 and don't want to let it happen again."
David Menlow, president of IPO Financial
"For the investor who thinks that Google or Yahoo are at a premium, how can you justify Baidu at even five times greater valuation than Google or Yahoo when it's only a China play?"
Martin Pyykkonen, managing director at money management firm Hoefer & Arnett
"It's a tsunami of retail interest. The guys doing the pricing priced it for the fund market and they didn't realize the huge wave of retail interest. And the retail investors don't have a clue about the valuation. (...) The whole online e-commerce market in China last year was $130 million. "So, [Baidu.com's market cap] is approaching 30 times the entire market in 2004. And it's just a regional market. Chinese is not the international language. People are buying the story that it's the second largest web site in China's growing market. But they forget it's very much a one-country wonder."
Francis Gaskin, editor of Los Angeles research firm IPOdesktop.com.
"I think the stock's rise is outrageous. This is another one of those bubbles. At the $27 offer price it was trading at 64 times sales. Even though its sales tripled last year, that doesn't justify a 64 price-to-sales ratio."
Fariborz Ghadar, director of the Center for Global Business Studies at Penn State University
"It's a speculative fever right now. It doesn't make any sense. But as we saw in previous bubbles, that doesn't mean it can't keep going and make people money in the short term as they profit off of the greater fool. But if you're a long-term trader looking for valuation and the worth of the business based on its general future profits and cash flows, this is a ridiculous price."
Raymond Lin, portfolio manager with Tricera Capital, a San Francisco hedge fund specializing in Asian markets
"Congrats to Baidu and their investors. But if I am Baidu, I am seriously pissed at my bankers. They left almost USD $100m of Baidu company money on the table. Either they were really incompetent in gauging investor demand, they decided rewarding their institutional accounts with an Internet bubble throwback freebie was more important, or they figured they needed to keep the raise relatively low to encourage future fundraising business by Baidu. The approximately USD $100m Baidu raised is chump change when you are competing in this market sector against Google, Yahoo and Microsoft."
Bill Bishop, CEO, Red Mushroom; Co-founder CBS MarketWatch
And what did some manly guy at the Motley Fool say about GOOG, back in 2004?
My take? If you personally use LinkedIn or know lots of people who use the site, then buy some shares. Don't go all-in, of course -- but buy some. Isn't this what investing is all about? You buy what you know and you buy the companies that make the products you use. So don't listen to the pundits on IPO's. They all go by valuations to make their usually negative calls. And aren't all IPO's overvalued by their very nature?
In the end, buying LNKD right now is similar to a roll of the dice. You might get lucky, you might not. The conservative investor or speculator will let things shake out and simmer down some before putting hard earned cash on the line.
ReplyDeleteDo you remember your comments on TSLA and DANG when they first came out? Buying in during that first week would have been foolish. There have been many good and safer entries since then.
Other than a trade, DANG is not an investment because nobody can tell a DANG from a DONG. I don't know anybody who uses DANG. Heck, I don't even remember what Dang does. BIDU was an exception because we know how successful search is (and the ceo was Stanford trained so the company is probably more honest with their financials), and anybody that dominates search in their country will do well. The next ipo - Yandex, the google of Russia is also a good investment...even though I don't know anybody who uses Yandex.
ReplyDeleteTSLA is not an ipo everybody should buy. It is very speculative and isn't growing rapidly.
LinkedIn isn't in either of the above categories. It is a worthy buy. It grows fast and I know lots of people using the site.
Certainly if you can get the price lower than the ipo, all the more power to you. The point is to buy some, now or eventually. Here is the problem with waiting for a sale price. The problem is, those who talk down LNKD (or those who think the ipo price is too expensive) will never buy LNKD (until after double of tripling of price a few years from now). If the price goes on down, they feel they were right for not buying LNDK, and they won't buy it even on sale.
Really, you don't remember what you said about DANG? That is was going to be China's equivalent to Amazon or Ebay and to GET SOME NOW!
ReplyDeleteMy point is that it is always safer to buy after the pullback or dip, even if it is at a higher price. And stocks always dip and pullback, ALWAYS.
You're still better off to buy DANG at the first 2 weeks of ipo and embark on bvi generation than to wait for a dip that may or may not come. DANG isn't the best ipo out there but I think it does have longer term potential. Other companies like MA and GOOG and LNKD that are well known brands, I believe the best approach to dive in early.
ReplyDelete