Thinking about buying shares in the next hyped Internet or social media company touted by a cold caller, your stock broker, co-workers at the water cooler, or friends or relatives at the barbecue? You may want to read this!
My PrivateBanking researchers examined the previous dot.com bubble and the investment banks who were involved in “the most disastrous deals of that time,” in order to see what could be learned and what conclusion high-net-worth investors might draw for themselves. The research firm created a list of the top ten high-profile, value-losing dot-com IPOs and subjected each to a detailed review. "In not one single case did investors—over the long term—make a profit from the IPO,” the report notes, adding that in 60% of cases investors lost all or almost all of their assets. (emphasis ours)
Among the worst performers—listed by company/IPO, year, business model, performance since IPO (excluding dividends), and lead underwriter(s)—are Webvan (1999, online grocery, bankrupt, Goldman Sachs); Pets.com (2000, online retailer, -99%, Merrill Lynch); Barnesandnoble.com (1999, online retailer, -83%, Goldman Sachs, Merrill Lynch); and Vonage (2006, voice over IP, -73%, Citigroup, UBS, Deutsche Bank).
Investors’ “irrational exuberance” in regard to some of these IPOs and the dot.com bubble itself played a greater role than any real examination of a company’s realistic valuation, according to the report. Today, looking at the balance sheets of recent Internet IPOs, “we see a lot of similarities that should worry an investor,” said MyPrivate Banking. (emphasis ours)
MyPrivateBanking is an information resource for the affluent. How about the rest of the poor "suckers" out there?