An IPO is an Initial Public Offering. This is the initial sale of stock to the public from private investors and holders of the company. There are several reasons why a company would issue stock to the public. Publicly traded stock allows the company to offer shares in mergers and acquisitions, easing the mechanism in purchasing other companies and lowering the cost. Publicly traded stock also allows the company to offer incentives to employees, by giving shares of stock. The greater exposure and publicity also help retain and attract talented employees and management. The value of a company is also higher compared to when it’s private. This is because increased levels of liquidity and transparency are more attractive to investors, who will allocate a higher multiple for the company’s value. The biggest downfall to a company issuing stock to the public is greater scrutiny from investors, as all financial records are made public. This comes in the form of an increase in legal and marketing costs, plus time spent with analysts and other investors explaining the inner workings of the company.
Imagine letting a losing trade run, and before you even realize it, the position is down 20%, 30%, or more. Your $10.00 stock declined 30% to $7.00; you decide to hold the position, hoping for a rebound, but deep down you know the stock would need to rally more than 40% just for you to break even. Clearly, it’s not easy when a stock falls to greater depths.
But that’s why you should take the opportunity to dump losers when the stock market rallies, as is the case at this time. Avoiding a loss is just as good as making profits.
As many of you know, I believe the stock market is vulnerable to some selling and a stock market correction, based on my technical analysis of the charts. The S&P 500 is fighting resistance to advance higher, and the Dow Jones Industrial Average, while setting anther record-high on Monday, continues to show the potential of a stock market correction of at least six percent.
Think about how the stock market has moved to these levels. The easy money policy pushed by the Federal Reserve has been a key driving force behind this four-year run-up. But now, with the Fed expected to begin tapering in December or early 2014, the focus will shift to the economy and corporate revenue growth—which aren’t so stellar. In fact, in both cases, they’re flat.
Even the surge in the initial public offering (IPO) market is a red flag in my view. When I see an IPO double on its first day, it reminds me of the euphoria that I witnessed in late 1999, … Read More
If you chased and purchased Twitter, Inc. (NYSE/TWTR) at $50.09 on the first day of its initial public offering (IPO), you would already be looking at a paper loss of 15.5% after the company’s stock price fell to $42.32 on Friday morning. For those who chased the stock price of Twitter higher—it was the wrong move.
Twitter was initially priced at $17.00 to $20.00 and was raised when demand became euphoric. Even at $50.00, the company’s stock price was already nearly three times the initial lower range, which is astounding. (Read “2013 IPO Frenzy an Omen for the Stock Market?”)
But just like Facebook, Inc. (NASDAQ/FB), Twitter’s stock price could inevitably head much lower after all of the initial excitement fades and investors realize the company needs to make money.
I wouldn’t be a buyer now at the current stock price; I still wouldn’t be buying the company at $40.00. A decline in the stock price to the mid-$30.00 range may strike my interest, but again, I would likely want to wait until the company’s stock price fell to $30.00 or below before even considering the social media stock. At $20.00, I would seriously look at picking up some shares of Twitter. Some of you may not believe Twitter will sink that much, but just look at what happened to Facebook and Groupon, Inc. (NASDAQ/GRPN) following their strong debuts.
With social media stocks, it comes down to eyeballs—the more, the better. Facebook has about one billion users, so it is intriguing to investors. The company is working hard to monetize its user base … Read More
These are some scary times for holders and chasers of some of the high-volume brand-name momentum stocks, especially in the Internet services area. (Just in time for Halloween…)
While I always like to trade and follow the trend, I’m concerned with some of the superlative moves in the stock market and the resulting excessive and non-realistic valuations in the Internet area.
While I don’t want to wreck the celebratory mood on Wall Street, I highly recommend investors take a step back and really look at some of the euphoric buying we have been seeing specifically with the Internet stocks. It reminds me a bit of what happened in late 1999 and early 2000, prior to the market implosion.
We are clearly witnessing some unjustified buying in Internet stocks as overzealous traders seek profits. The problem is that the pro traders generally are a step ahead and know when to exit.
You don’t want to be caught in a massive stampede to the exits. I’m not saying it will materialize, but it’s something you have to keep in mind.
In my previous article, I discussed the upcoming initial public offering (IPO) for Twitter as it begins its road show this week, drumming up business for what will likely be its overpriced IPO and the frenzy to follow. (Read “How Small Investors Can Still Get a Piece of Twitter.”)
The current valuations I’m seeing with numerous Internet stocks in the social media space is outlandish and would make Warren Buffett shake his head. Buffett may admit to not understanding technology and the Internet, but he clearly knows a … Read More
Twitter Inc. is the most highly anticipated company to debut its initial public offering (IPO) this year as it sells its story to the big institutional investors who are clamoring to buy shares. Of course, there will likely not be a lot of selling needed for its IPO, as the company will garnish immense interest.
Sorry, dear reader, but we are out of luck, yet again. A popular IPO such as Twitter is never offered to small investors. You have to have major bucks and clout with Wall Street to get in on the deal. The way popular IPOs are sold was supposed to change with opportunities given to the small investor, but it hasn’t; so once again, we are shut out as the rich get richer.
You can probably indirectly get a piece of Twitter at the IPO price via investing in funds or exchange-traded funds (ETFs) that will buy into Twitter at its IPO price. The funds buying will eventually become clearer, but a possible ETF is the Global X Social Media Index ETF (NYSEArca/SOCL), which invests in brand-name social media stocks from around the world.
Based on what we have seen so far this year, technology IPOs are hot and you can expect Twitter to likely double up on its first day from its expected subscribed IPO price of between $17.00 and $20.00 sometime in early to mid-November.
For the average investor, the hope will be that Twitter copies Facebook, Inc. (NASDAQ/FB) in its first day of trading, but I doubt that. (Read “The Plentiful Opportunities I Still See in the … Read More
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