Friday, March 2, 2012
Yelp-ing At-Groupon-et al
Are we in for another DOTCOM BOOM/BUST scenario? Today YELP was IPOed at $24 and change.
The company hasn't made a profit since 2004! With $83 million in revenue and NO PROFIT last year, the market is either stupid or long term smart, unless all of the money invested in Yelp is for a very, very short term gain, say a few days, weeks or months.
Another hysterical media event was Groupon. Here's what happened with that stock:
If you bought in at 09:30hrs on the day it was offered for sale and got out at just before 10:00hrs you may have been unscathed. If you held on until the end of the day you would have been absolutely SCREWED!
Back during the DOT.COM-insanity, people realized after 2-3 years that certain stocks were NEVER going to make a profit, yet the big investment banks were singing the praises of this.COM and that.COM while at the same time SHORTING THE CRAP out of the same ones, people like Henry Blodget of Merrill Lynch, who admitted that many of the stocks he trumpeted, as quoted below:
“The majority of today's pure-play Internet companies will never make money and will not exist in three-to-five years. There will be a lot of consolidation and a lot of failure, and ultimately valuations will fall more in line with historical norms.”
Here's some of Henry's legal problems when he was investigated by the SEC under anti-fraud provisions. Reading some of the emails he wrote, while at the same time heralding stocks that were GOING NOWHERE, HDD believes Blodget was an over paid crook, pedalling crap to greedy punters.
HDD does not believe that companies that have consistently broken even or lost money over several years, in Yelp's case, 8 full years of no profit, can sustain a rising stock price, UNLESS Yelp is taken over by GOOGLE or BAIDU and the investors involved in Yelp don't expect profits either.
Only time will tell.
By 10:30 hrs EST today Yelp was trading at $24 and change.
Let's check back later today or on Monday and see what the market REALLY thinks of Yelp! 2012 sees about 200 IPOs ready to dart out of the starting gate and the DADDY of them all, FACEBOOK, is watching and waiting with bated breath!