Friday, May 20, 2011

Hot IPOs

The LA Times has a list of the hottest IPOs of the tech bubble. I am old enough to have forgotten most of these. The party on listing makes Linked In's debut look modest.

Some of these stock-stags were plain silly ( which (miraculously) is still quoted (at 1c per share) on the OTCBB.

One stands out as a genuine success story and a core part of modern internet technology - that is Akamai. However it is - despite considerable success - still trading well under the first day pop in the stock (though above the IPO price which makes it a real success story from the tech wreck).

The standout - the all time biggest IPO pop - is VA Linux - which has since been renamed "Geeknet". Its a real business: I use their products and even have positive feelings towards the company. Their stock chart however leaves something to be desired.

This stock rose 698 percent on the first day. Linked In is nowhere close (so maybe Facebook comes on with a market cap of $450 billion).

As a fund manager my guess is the best way to play this trend is to ignore it. Best to look where people are not looking. Everyone and their dog is looking at social media.

And socially so am I. I am off to open a Facebook account for my dog. Wonder if Lou Reed will "friend" him?


Just for kicks have a detailed look at the charts.  VA Linux/Geeknet is trading roughly at its 2002 low. The Globe.Com had no comeback and Akamai is a fifty bagger from the lows.  The real opportunities are during the crunch. But even if you picked Akamai as the winner out of these you probably purchased at at $5, $3 and $2 and buying at at 71c would not have happened. And you would have looked and felt like a sick puppy as you watched your quoted wealth evaporate.


Anonymous said...

Hi John,

Context is important here. One big reason for Akamai trading so low at that time is that the founder was in one of the 9/11 planes ... creating all sorts of uncertainty about the company's future.

Anonymous said...

So, uh... in a few months we should start looking at Chinese microcaps? :)

Anonymous said...

Hi John,

Which is the better short: the hot IPOs or the frauds?

John Hempton said...

I have expertise in frauds. But when the IPOs are 250 plus percent gainers I get really jaundiced. Really really jaundiced.

But I suspect Linked In is early not late in the cycle. Time will tell on that.

My view: no position.


Michael said...

I was involved in the Linux scene when whole VA Linux thing was going down--in fact I had been to a few SVLUG events and Larry Augustin, the CEO of VA Linux, helped install my Linux bootloader. Lots of the other guys in SVLUG were involved with VA Linux's founding, too; Rick Moen, Chris DiBona, etc. I was at Linuxworld when VA IPO'd and a bunch of nerds walking around the conference room floor were now paper millionaires. Everyone thought Red Hat was going to destroy MSFT's market. Good times, good times...

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.