The Stock IPO Game

When Facebook went IPO in 2012, its stock price was $38 a share.  Wall Street is having doubts on the company's ability to make money.  The share price went south to as low as $18 a share.  The social media darling became the Wall Street nightmare.  Three and a half years later they trade at $102.97 with a PE ratio of 103.44.


The other shining star is LinkedIn.  To date, its share price has gone up a whopping 232%, but the company has yet turned a profit.  LinkedIn is looking to be another Amazon miracle.  Traditional fundamental evaluation does not matter and does not apply to these Wall Street darlings.

However, some other companies do not enjoy the equal treatment such as Groupon.  It has lost almost 85% of its market cap.  Everyone loves a bargain.  Everyone loves a discount.  Groupon delivers them to our inboxes.  How come they don't deserve any love from Wall Street?

I recently jumped on the IPO bandwagon - Square.  I thought $11 a share was a bargain for a payment processing company.  I was even happier when I learned that the IPO price was reduced to $9 a share the day before the company went public.  I have sold all my shares since then.  I took the profits and ran.  Why?  The company has not yet turned a profit and I got scared.  I didn't want to wait till the earning season, and when bad news came out, I got punished for it.  Will Square become the Wall Street darling and fly sky high as LinkedIn has enjoyed?  Only time will tell.


IPO

First Day High

Now

IPO P/L

PE

Facebook 38 45 102.97 170.97% 103.44
Groupon 20 31.14 3.03 -84.85%
LinkedIn 68 122 226 232.35%
Pandora 16 26 11.21 -29.94%
Square 9 14.78 11.52 28%
Twitter 26 50.09 21.39 -17.73%




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