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Of interest to all traders should be the article in Jan issue of
Vanity Fair on IPOs.
The writer compares it to the tulip bulb mania of the 1630s. I know
we have all heard it before but, companies that have bad business
plans and have never made money are coming out as ipos and are being
priced by the market
as though they are worth billions.
People joining these companies are given stock deals that can make
them worth hundreds of millions on paper.
Examples, theglobe.com and Netzero
But as traders, we cannot short these stocks until they show weakness.
My friend thinks the best strategy is to wait until they fall 50% in
value then short them. When will that be?
IPOs
Ipo traders should take note. The trader featured in the article has
traded in and out of 260 ipos this year netting about 5 million
dollars. And he is buying the stocks after they start trading, not
getting them at the offering price.
Amazing facts about the ipo market.
This year twice as many ipos doubled in value the first day as in the
previous 25 years combined.
The average ipo is up 57% on its first day.
So, it doesn't matter what the fundamentals are momentum is what is
being traded these days.
Tim Lee
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