Hot IPO dilemma — sell or hold?
Internet stock offerings this year have followed a pattern
that can help you decide
By Bob Sullivan
MSNBC msnbc.com
July 27 — It's the big day, and this time you're the one about to make a killing on a hot Internet IPO. You're lucky enough to be holding 100 or 500 shares at the offering price. About midday, Getrichquick.com starts trading. The shares were offered at $21, but thanks to “panic buying,” they start trading at $55 and quickly jump to $63 — a 200 percent gain. Now what? If Getrichquick.com is like most other Net IPOs this year, and you're looking for short-term profits, you should sell. The stock is headed for a fall and won't see that first-day high for some time.
WHEN MP3.COM STARTED trading last week, it followed the first-day pattern like clockwork. After increasing its offering price to $28, frenzy swirled around the stock. When the doors opened, the first trade passed at $92, more than a 200 percent gain. Within moments, MPPP hit triple digits, and “panic buying” pumped the price up to $105. But then the big turnaround began, and by day's end, MP3 had fallen all the way to $63 3/8.
If you held IPO shares, you still had a more than 100 percent gain. That's one way of looking at it. The other way: It's a 40 percent loss from what the shares could have been worth. And if you're still holding MP3, the story is even sadder — the stock was trading below $50 by Tuesday.
The MP3 pattern — an initial gush of buyers who seem willing to pay any price is followed by an even bigger wave of profit takers has been followed by most hot Net offerings this year: eToys.com, Hoover's Inc., Marimba Inc., last week's Insweb Corp. Many frustrated investors, like those who own theStreet.com, often find the date of a stock's all-time high harkens back to its IPO day.
[continued... msnbc.com ] |
