The IPO pipeline is beginning to look like it did during the heyday of the dot-com boom in 1999-2000, Fitzgibbon says. That go- go era for dot-com stock presaged the market meltdown.
“If you don’t strike now, who knows what tomorrow will bring,” he says.
Dow Jones Newswires does okay too. Here’s a good analyst quote:
The financial data on Angie’s List “is not good at all, but their brand names awareness is key,” in their debut’s success, said Scott Sweet, managing director of research site IPOBoutique.com. “This is not one in which you park money that you can’t afford to lose. We’re not talking about impressive numbers.”
But Angie’s List hometown paper The Indianapolis Star does a poor job with its story. It mentions the company’s price-to-sales ratio, but doesn’t report anywhere that the company loses scads of money—a baffling omission. It’s particularly bad form since stocks tend to be disproportionately held where companies are located. Time, in talking about the IPO’s “enormous success,” doesn’t mention that the company loses money, either.*
The Los Angeles Times includes a skeptical voice, but doesn’t note that the company is unprotable until the seventh paragraph of its story. Investor’s Business Daily does better, noting it in the third paragraph.
Reuters is pretty good, running with this lede:
Shares of consumer review website Angie’s List surged as much as 44 percent on their market debut Thursday as investors continued to lap up internet offerings, but concerns about the company’s profitability could loom on the stock.
But Bloomberg doesn’t do well, dropping the company’s unprofitability down in the eighth paragraph of a thirteen-paragraph story, and offering no skeptical quotes.
When a company is losing lots of money in the hopes of possibly making money at some unknown-but-distant point in the future, it’s a particularly speculative stock. That’s worth closer attention and a skeptical eye.
* I added the sentence about Time half an hour after originally posting this.
From nothing to $85 million in sales in 16 years for a private company is remarkable.
No wonder the company is doubling down on marketing. I would too.
The nice thing about these new social media sites is that there is no brick-and-mortar overhead - thus they can shrink if necessary. No warehouses. No labor contracts. No inventory. No vendors. No logistics.
If the bubble bursts, there's no reason for the business to collapse entirely.
Just a server in a data center and enough people to keep it running.
And the product is customer-supplied!
Having customers pay to give you your product! Pure genius!
#1 Posted by padikiller, CJR on Mon 21 Nov 2011 at 01:11 PM
It occurs to me that the some of the people who quite reasonably lack faith in money-losing enterprises are the same people who profess unwavering faith in the credit of our money-losing government.
#2 Posted by padikiller, CJR on Mon 21 Nov 2011 at 02:06 PM
"If the bubble bursts, there's no reason for the business to collapse entirely."
Ida' know. I always thought bankruptcy was a pretty good reason. In the good old days, we used to read about the legions succumbing to that reason daily on f***edcompany.com.
Leverage works if it allows you to capitalize on untapped demand and generates income.
Leverage that leaves you 50 million in the hole? Based on a strategy that costs 25 million per year more than it generates? Sounds more like Brewster's millions than Buffet's.
#3 Posted by Thimbles, CJR on Mon 21 Nov 2011 at 02:30 PM
Yeah... but with a market capitalization of nearly a billion dollars, this business can afford to forgo revenue and swing for the fence.
If it works... Great. Investors make gobs of money.
If it doesn't, the company can just shrink and eat what it kills and investors don't lose everything.
It's one thing if you're pets.com and you have warehouses full of inventory and shipping and vendor contracts. You can't just shrink that kind of business - closing a warehouse impacts the business model directly and screws up the whole system. You have a lot of capital tied up in business that sells tangible products or that pays for content.
Of if you're pornosite.com (or CJR.org) and you pay (in theory) for content.
It's another thing to recede to 30 leased servers from 100 and to 50 CSR's from 300 when you not only don't pay for product, but actually charge people to produce your product and when you have no long-term capital commitment. You can shrink this kind of business as easily as you can grow it.
#4 Posted by padikiller, CJR on Mon 21 Nov 2011 at 02:59 PM
"If it doesn't, the company can just shrink and eat what it kills and investors don't lose everything."
Unless investors liquidate the stock since there's insufficient ROI and there's no revenue to pay off outstanding debt.
Then you're bankrupt and, due to the content only nature of the business, there's nothing for creditors to liquidate.
That's what I've seen in the past.
#5 Posted by Thimbles, CJR on Mon 21 Nov 2011 at 04:33 PM