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Technology Stocks : AUTOHOME, Inc -- Ignore unavailable to you. Want to Upgrade?

To: American Spirit who wrote (8160)	4/18/1999 9:20:00 PM
From: FR1	Read Replies (1) \| Respond to of 29970

BKS will certainly fly this week I just want to point something out about the hype on the IPOs. You get the feeling that everybody makes money on opening day as the stock goes up x hundred percent. Actually, the opposite is true. When I looked at it, almost everyone loses money. A typical example would be GeoCities. They were screaming on TV about how the stock broke all the records with a 600% or so gain. For Joe, the average investor, here is the actual story: Joe: Mr. broker I want you to invest $10,000 in GeoCities when it comes out tomorrow. Broker: Got it Joe - I'll buy as soon as it is available. Joe sees the TV report of 600+% gain and is jumping for joy. Next day he calls his broker. Joe: We killed them that time! How much is in my account? Broker: Well, let's see - you lost $1,666. Joe: Impossible!!! I heard 600% gain on TV! What happened? Broker: Well, it works like this. The stock was priced at $11. The market for GCTY opened but trading was immediately suspended because they have to fill back orders for institutions, etc.. The price of the stock shot up to $68/share. Then the public was let in and it immediately zoomed through the 70's before you could get an order filled. Finally we filled at $84. The stock kept shooting up to $96/share. Then all the institutions sold like bandits and the stock dropped like a rock. I didn't have authority from you to sell and the stock finished at $70 - just $2 above where the public was allowed to buy. So we lost $14/share and had 119 shares so we lost $1,666. plus commissions. *********************************** The numbers above are not exactly correct but the idea is correct. I do remember GCTY because it did settle just a few dollars above where the public could buy after shooting 30 or so points above that. It was remarkable to me because the talking heads on TV were just screaming at how much money you missed out on by not buying. Any average person that just put in a buy order for that day lost money. I looked at a number of other IPOs and they were all much worse. This does not mean the stock will not be up in the long run (GCTY up 226% in Q1) but the opening day is not what people think. If the stock is not a fundamentally good long term investment you might want to pass. IMHO - BKS is a badly run business and has gotten in bed with Burtelsman (sp?) who is even worse. However, they have very deep pockets and have lots of great ways to cook the accounting books between BKS and its internet IPO. Short term gain - long term flat unless they totally remake themselves (not likely).