by Louis Basenese, Advisory Panelist
Senior Analyst, The Oxford Club
The IPO buzz is building… In a span of one month, the number of IPOs in 2009 doubled. Half have been tech IPOs.
Sure the tally stands at a pathetic six. But with over 100 deals waiting in the pipeline, the uptick is being closely watched.
Even more so, considering that last week’s debut of Digital Globe (NYSE: DGI) - a provider of satellite imagery used in Google Maps and Microsoft Virtual Earth - garnered interest reminiscent of the IPO heydays in the late 1990s.
Heck, it broke into Google’s Hot Trends list, meaning it was one of the fastest-rising search terms in the world. (That’s no small feat considering it meant beating out pop culture search mainstays Britney Spears, Ashton Kutcher’s twitter record and Desperate Housewives spoilers to name a few).
However, I’ve learned hype seldom translates into profits in the IPO space. In fact, I revealed that I was skeptical about the Digital Globe IPO from the outset.
Sure enough, the aftermarket performance only confirmed my suspicions. Despite pricing above the projected range at $19, and rallying in the first few moments of trading, the stock is now in negative territory.
Nevertheless, the buzz is building about another tech IPO this week. But it, too, should be avoided. Let’s take a look at why. Then I’ll share my proven formula for sifting through the IPO hype to find sure-fire winners.
Tech IPOs: Cancel Your Reservations at OpenTable
On Thursday, the tech IPO, OpenTable (Nasdaq: OPEN) a provider of online reservation services for restaurants, will begin trading.
As a frequent user, I’ll concede it’s a convenient service. In a few keystrokes I can guarantee a table at my favorite sushi restaurant, instead of waiting on hold forever or getting an answering machine. And it’s free.
Don’t worry. This isn’t some dot-com company with a clever idea and no revenue stream. It makes money by charging restaurants one-time installation fees (avg. $1,200), monthly service fees (roughly $260) and $1 for every reservation.
A novel concept, for sure.
