Bravo Jeff!! I concur 100% with your analysis.
I think your strategy is right on the mark. The internet stocks are much too volitale to short. Look at AMZN...the only reason its so high right now is because people keep shorting it and forced to cover at a much higher price.
Let's say you short 1000 shares of AMZN. Sure, you feel comfortable with shorting 1000 shares but when AMZN declares a 3-1 split, you will now be short 3000 shares!!! Now, you don't feel so "safe" about your short position; its a much LARGER short position than before and there's now 3 times as much volatility. Hence, you'll cover...especially since other people are buying in so they can take advantage of the split.
Now, with MALL, you're right again. My Merrill Lynch broker and myself both believe that MALL will remain at around 80-85% of the price of UBID on the IPO day. So if UBID opens at ..let's say...$50, then MALL will probably shoot up to $40 or higher. At this point, $50 is a very pessimistic price to give UBID after its IPO. With only 1.5 million shares available, your likely to see it open above $75.
Long term though, shorting MALL may be a very good idea. Of course, shorting ANY Internet-related stock may be a good idea in the long term as most of them have ridiculous valuations. Short term, I'd stay away from shorting until the internet frenzy fizzles away. Lastly, why would anyone want to short MALL ...as compared to other internet stocks? There's MUCH MORE UPSIDE POTENTIAL in MALL than most other e-commerce stocks since UBID is going IPO. There's 3 trading days left before the IPO and I expect to see a lot of people trying to get in at the last minute and a lot of short coverings. Good luck all.
-Kenneth |
