The air is quickly coming out of some of these recent tech IPOs. Brightcove (BCOV) is really giving up the gains, down more than 7% today. The February IPO price was $11, but it opened for trading at $14.50. After running up to $25.50, it's at $17.67.
Mobile ad network Millennial Media (MM) went public last month at $13, opened at $25 and hit a high of $27.90 that first day; it's now at $18.68.
@Noreen: I blame the crazy valuations. A lot of these IPOs get bid up out of the gate, but it often doesn't last. At the high, Millennial was trading at 20X last year's revenue.
That pretty much supports what we've been stressing...that IPOs are iffy at best and generally a poor bet for investors. Better to wait for the air to clear, right?
Definitely. A lot of these new companies need a few quarters to mature once they're public. The growth expectations are usually too high. But then there can be buying opportunities after they stumble.
Yes Rob exactly -- my standard rule is if you are interested in an IPO, wait six months after the IPO. Usually something happens like the insiders sell a bunch of stock after the window opens up or they botch their second public quarter.
As i recall this is exactly what happened with Google, a good buying window was about 6-8 months after the IPO.
In the end , it is about earnings. Companies like Groupon may excite people, but with many competitors, a low barrier to entry and a hioghly fickle group of customers, It is hard to see how that equates to long term eanrings growth. Many of these new IPOs seem to rely on the Wow factor, not substance.
That may explain the drop in enthusiasm for those Chinese based firms. The accounting standards abroad make me nervous, because I'm not sure if I'm dealing in reality or hot air.
There have been enough irregularities uncovered in the past few years to make those feelings absolutely valid. And take 360buy.com. The company claims it posted annual growth rate of 350 percent, 266.67 percent, 203.03 percent, 155 percent and 105 percent from 2007 to 2011, respectively.
Amazing if it's true. But is it? And with China stalling, will these growth rates sputter out too?
Buy360.com is the so-called Amazon of China. Crunchbase defines it as "the largest Computer, Communication, and Consumer Electronic online retailer of the B2C market in China and it is one of the most popular and powerful E-Business websites with around 10,000,000 registered users in Chinese E-Business field."
Last year the Walton family (of Walmart fame) invested in 360buy.com through its investment branch and holds a stake of less than 1 percent.
360buy.com has also been a focus for investment by the Russian-based Internet investment group Digital Sky Technologies (DST), which paid more than $500 million to gain a stake. DST already owns substantial stakes in some significant US-based Internet companies, including Facebook Inc, Groupon Inc and Zynga Inc, according to a report in the Financial Times.
All that aside, the numbers are not pretty: According to media reports, the online mall's net sales volume was 21 billion yuan (US$3.3 billion), 22 percent below the 27 billion yuan (US$4.3 billion) target announced last September. 360buy.com lost a total of 1.2 billion yuan (US$190.4 million) last year, with a gross margin of 5 percent.
The IPO market may be improving, but not for Chinese based companies. I found it interesting to watch what happened to online retailer Vipshop Holdings Ltd., a Chinese firm that went public last month.
Vipshop priced the American depositary shares in its IPO at $6.50. However, the ADSs opened at $6 on March 23. Shares closed at $5.50 on opening day, and were down to $4.52 yesterday.
I think it's interesting because of all the speculation about 360buy.com -- the Amazon of China -- doing an IPO here this year.
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