06.16.2011
02.27.2013 Update (page bottom) & replaced link with PDF
NetAdvisor Flagged Caution in Hyped IPOs – LinkedIn, Pandora, Renren, More
original article written by Net Advisor™
Those who follow us on Twitter may have seen our time-line flagging words of caution on some of the newest so called “hot” Initial Public Offerings (IPOs) .
I have been especially Bearish on LinkedIn (NASDAQ: LNKD) and Pandora (NYSE: P) since Day one on their respective #IPO’s saying to avoid.
Here are highlights of our Twitter time-line related to these recent IPO’s. Note words of caution and what happened to the stock price thereafter.
Pandora
06-15-2011
“#stocks – #PANDORA (P) #IPO hit today. Priced $16 Open $20 High $26 in AM Currently $20.71 Like LNKD avoiding, esp this one = not profitable”
06-15-2011
“#stocks – #PANDORA (P) closed +$1.42 from #IPO price of $16, but down 33% from today’s high of $26. Said avoid earlier http://goo.gl/oktpv”
06-16-2011
“#stocks – #Pandora (P) #WHACKED! A technical crash -23.88% 1 day after #IPO. Closed $13.26 dn $4.16 Stock is down -49% since yest’s IPO high”
One day after the IPO, Pandora received its first analyst “Sell” rating (Source: CNBC).
LinkedIn
04-18-2011
1 Day before the IPO:
“Be careful on this one. Seems pricy to me”
04-19-2011
(LinkedIn) stock to pop, “not jumping in”
04-19-2011
“…Company expected to lose money in 2011 /// .com rebirth?”
04-19-2011
“Watching most of the trades are 100 shares, suggests this is small investors speculating like it’s 1999. :P”
04-19-2011
“@cnbc — #LinkedIn (#LNKD) #IPO —– “It’s Different This Time” 😛 Meeeeemories….”
05-20-2011
“#Stocks – LinkedIn #LNKD hit $107 today then reversed to close down $1.28 to $92.77 Yesterday the stock bigger than 46% of S&P 500 companies”
05-20-2011
“#Stocks – #CNBC #KarenFinerman yest: If #GOOG was trading vs. sales multiple as #LinkedIn is curr trading, GOOG would be $2,600 – pricey!”
05-23-2011
“#stocks opening sharply lower #Dow -150; LinkedIn- (LNKD) linking out -7%”
05-23-2011
“#stocks – LinkedIn (#LNKD) avail to short tomorrow 05-24-11. Options come avail for trading later this week. Still avoiding. May look @ puts”
05-23-2011
“#LinkedIn has security vulnerabilities. Accounts vulnerable to attack w/o passwords says expert http://t.co/NRGSwdG /// #security #privacy”
05-24-2011
“#stocks – Staying away from #LinkedIn. I’ll wait until panic sellers hit, then buy near term put options. Price likely supported by IB’s now”
05-27-2011
“#stocks – #LinkedIn #LNKD #options – have a spread so wide you can drive a Mac truck through them. ~200-400% spread in some June contracts”
06-16-2011
“#stocks – #LinkedIn (LNKD) -8.51% to $68.27 Stocks is down 44% or $54.43 since its IPO 1st day high”
Renren
06-08-2011
“#stocks – #China’s version of #Facebook, “Renren” (#RENN) trading dn -10% Reportedly, valuation is 2x of #FB (Bloomberg) http://t.co/uHWHaJj”
06-09-2011
“#China #IPOs getting whacked recently. Overvalued, hyped, negative bias. Discussed #RENN -12.75% in recent tweet. Also #DATE -10%, others”
06-09-2011
“US regulators scramble to warn on #Chinese #stocks http://t.co/OJTQjCH // Discussed http://t.co/bSiQkjK”
06-09-2011
“Brokerage firm banned clients from margin borrowing on 160 Chinese #securities because of #accounting #scandals n #China http://t.co/eshtjMd”
What’s Next? Groupon
The company who actually has revenue filed to go public, but the valuation is at serious question. Fourteen days after this tweet (also dated below on 6-2-2011), the Washington Post questioned Groupon’s IPO valuation (PDF).
Groupon
06-02-2011
“#Groupon files for #IPO of up to $750 million (Reuters) http://t.co/vVF7nQi /// Prob will avoid this one too.”
These trendy stocks are pricing like its 1999 – the height of the Dot Com market, where making money (valuation) didn’t matter. The way I see it is that there are a ton of people who are familiar with these social networks, entertainment and shopping tools, but what they may not be familiar with is whether the business actually makes money; or have asked whether their stock valuation supports the company’s bottom line.
Perhaps one day these companies find a way to bring in revenue to match their stock’s valuation, but for now, that looks like a tough job.
– – –
This article filed under “Trends” because keep in mind that trends can change over time, however for these stocks at this time we still see risk in the stock discussed.
Disclosure: At time of post, Net Advisor™ is NOT currently long or short any of the stocks mentioned in this article. We do make it a habit to disclose if we have a position in a security discussed in an article.
Logos (TM) (R) copyright of their respective companies.
Copyright © 2011 Net Advisor™
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02.27.2013 update:
Pandora may have some good tunes, but as for making money, this still seems to have not hit the right note with investors. The company announced on 02-27-2013 that they will limit free listening to mobile devices to 40 hours per month. The purposes is to reduce the costs to royalties they have to pay to artists for broadcasting their music. Basically, the company is paying so users can listen to free music. How long can that business model last?
Pandora’s stock traded to $12.74 on 02-27-2013 (PDF); still down -36.43% from its July 1, 2011 high of $20.04.
LinkedIn has thus far proven better than expected. It was rough in the beginning trying to determine what value the company should really have. The stock had some high volatility for awhile, trading down about -33% from it’s 2011 IPO high of $92.99. The stock got down to $60.00 on 11-28-2011, well below the $45 IPO price.
The company is currently profitable with positive earnings growth. Let’s hope that trend continues. The stock has seen a big surge in January-February 2013 but it might be getting a little bit pricy in the near term. LinkedIn’s stock hit $168.55 up $10.78 (PDF) after analysts upped forecast.
Renren. The Chinese social networking website is not exactly Facebook or Twitter. The company’s IPO came out at $14 and soared to $24 per share based on the hype that a billion+ people in China would suddenly help the company to profitability. This has also been a bit of a challenge stretch for Facebook, however Facebook has a lot more capital and institutional backing. Renren’s stock has since fallen to $3.01 (PDF) since its all-time high or down -87.46%.
Groupon. A great concept of getting merchants to discount products or services (often food), but translating this into profit for Groupon seems to be problematic. We covered a full report before the IPO and updated the report here. Please see updated Twitter post.
Disclosure: Net Advisor™ or clients currently do not hold any positions in the companies mentioned.
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