

Public market newcomers getting crushed in sell-off - antr
http://gigaom.com/2011/08/08/tech-ipo-sell-off/

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_delirium
This doesn't seem particularly connected to the S&P downgrade, despite the
kind of vague implication in the article's intro. The downgrade didn't have
the effect (contrary to some predictions over the weekend) of causing any sort
of Treasury selloff or interest-rate spike, through automatic selloffs or
default fears or any other mechanism--- Treasuries are actually _up_ on the
day. And it didn't provide the stock market any new information that it didn't
already have heavily telegraphed during trading last week. It seems more
likely that this is just increasing pessimism about prospects for economic
growth, rather than worries about debt serviceability. If it were the latter,
you would not expect people to be rushing to _buy_ Treasuries that they
thought were going to default.

~~~
ajg1977
Unfortunately this implied "downgrade = stock plunge" association seems to be
everywhere this morning with no mention that long term interest rates for US
debt have actually dropped.

Depending on the source it's probably down to ignorance, lazy re-reporting or
blind economic ideology, but if you believe that cutting government spending
and services during a recession/recovery is a bad idea then it's a scary thing
to see.

~~~
bdonlan
Wouldn't a downgrade be expected to result in an interest rate _increase_, due
to higher risk?

~~~
hugh3
You'd think so, wouldn't you?

On the other hand, where _else_ are you gonna put your money?

~~~
_delirium
In this case I'm not too surprised at the lack of change, mostly because
unlike with a little-known corporate bond or an inscrutable country nobody has
info on, the S&P ratings don't _really_ add new information that any economic
analyst didn't already know about U.S. Treasury bonds. So, assuming anything
remotely approaching an efficient market, any information S&P based its
ratings decision on should've already been priced into the bond prices,
because it was information everyone else has also had for a while now.

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jonnathanson
Groupon is a consumer-facing company, with a large percentage of its offerings
in the discretionary category. As it so happens, the American consumer is
getting clobbered and has less time/money for discretionary spending.

LinkedIn is in an interesting spot, because the job market sucks so badly, and
unemployment remains high (which, when you think about it, could go either way
for LinkedIn).

Sure, there may be some macro factors about the set of "newly IPOed companies"
that are going into their sell-off. But by and large, there are plenty of
rational reasons why the market for both of these companies' shares is in a
tough spot.

~~~
jcampbell1
Doesn't the majority of LinkedIn's revenue come from recruiters? It makes
sense that LinkedIn, Zillow, and Pandora are off more than the market as
recruiting, ads, and real estate tend to get hit harder than the broader
economy. Groupon was born during the recession, so may fare better than
others. Deep discounting and coupons are counter-cyclical.

~~~
jonnathanson
_"Deep discounting and coupons are counter-cyclical"_

Not if they're mostly (or even significantly) in discretionary categories and
experiences, though. You could offer me 90% off a tennis lesson, or 99% off a
trial run of Invisalign braces, but if I'm struggling to make ends meet on the
basics, such offers are of little use to me.

In fairness, I have no idea what percentage of Groupon's offers are
discretionary. (Though, anecdotally, it sure seems like a big number). But my
point is that I wouldn't put it past many analysts to assume that it's a
significant percentage. And that's all you need to move the price of the
stock.

~~~
jcampbell1
I don't think the term "discretionary", captures what happens during a
recession in the first world. I mean, when unemployment goes from 6% to 9%, 3%
of the population stops going out for dinner, and 70% of the population cuts
back on spending based on fear. That 70% of the population starts cutting
coupons and buying generic products, and shops at Walmart instead of Whole
Foods. Fashion industries get hit hard, but entertainment generally doesn't. I
really think the "deals" or "coupon" space is counter-cyclical no matter
whether the coupons are for skydiving or pickles. I personally don't have a
gut instinct for this space, as I am not a customer of Groupon, but I am
interested in the question "If you neighbor lost his job, would you buy more
or less Groupons?".

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kevinpet
If by "crushed in sell-off" you mean "declined roughly as much as the market
as a whole", then that's true.

~~~
tewks
This is untrue on a percentage basis.

lnkd: -14% djia: -3.75%

~~~
simonsarris
The dow jones doesn't work like that. The Dow % doesn't reflect the average %
downwards of its parts, nor does it necessarily represent the market as a
whole.

    
    
        Citigroup -15%
        Bank of america -17%
        B&N: -11%
        GE and Cisco -5%
    

etc

~~~
antr
% up/down does not provide valuable data. If you have access to a Bloomberg
terminal take a look at the free-float turnover. Shocking

~~~
apaprocki
LNKD has had ~22% of its float trading on average every day for the past
month. What do you find special about today?

~~~
antr
LNKD has a free float of c. 8,250,000 shares or c. 8% of FDS. Average daily
trading volume up to August 3rd, and adjusted for underwriting: 1.62m. Since
last Thursday (earnings call), when LNKD dipped c. 5%, trading volumes have
been 102%, 90% and 67% above the average daily volume. So then, 40%, 37% and
33% of its free-float, for August 4, 5 and 8 respectively. In just under three
trading sessions over 100% of the free float has changed hands. What don't you
find special?

~~~
apaprocki
Yes, but based on the 1.62m avg volume, that is ~20% changing per day on
average. So on average 100% of the free float changes hands every 5 sessions.
And now it did that in 3 sessions.. But that doesn't indicate to me everyone
suddenly dumped it today. It's been churning over 20% every day. If you look
at P or Z there is nothing much going on there. LNKD is just crazy active to
begin with, only amplified by recent events.

~~~
antr
Indeed, 5 to 3 days might seem close/similar, but 5 days is 66% slower
turnover than 3 days. IMHO, this data is representative

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ohashi
I suspect that it's a risk thing, new internet IPOs probably have the highest
risk considering what they do and how new they are.

~~~
raganwald
My uninformed opinion is that many of these new internet IPO stocks are
“greater fool” investments: They were bought for the purpose of selling to
others without a lot of regard for their underlying fundamentals.

A general decline in the stock market hits the demand for “fashionable” and
“greater fool” stocks hardest, so I expect professional managers to dump them
quickly.

~~~
dpapathanasiou
In that context, GroupOn's first-day IPO performance (assuming the IPO still
happens) is going to be interesting.

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siavosh
Makes me wonder if the "bubble" is over with all this talk of a double-dip
recession and Groupon/SEC ordeal.

~~~
chailatte
The bubble has burst.

\- Greece has defaulted. After that,
Italy/Ireland/Portugal/Spain/Austria/Belgium will soon follow, and France will
be downgraded, and Germany will leave the EU.

\- Japan is suffering -5% GDP per year. 70% of the nuclear reactors are
offline. Rice/Beef/Vegetable/Water radiations have been reported.

\- China's stock market just dropped 30%. The hidden banking crisis will
finally surface and blow up alot of banks. The ugly inflation that follows
will induce further unrest in a country of a billion people.

\- US is about to have a series of downgrades. States and local munis will
seek bankruptcies after downgrades. Hyperinflation will start. Social
security, medicare will be wiped out.

All signs point to the second dip in the global economic depression.

~~~
aaronblohowiak
Germany is a net exporter and they gain by freer trade throughout the euro
zone, so I doubt the will leave the EU. Will the leave the euro is another
question.

~~~
Vivtek
Yeah, _nobody_ is predicting the breakup of the EU, but a lot of people are
questioning the value of a single currency with a multiplicity of national
banks.

Rest assured, the Union itself is here to stay.

~~~
bubbleRefuge
Right, and those national government banks do not have credible deposit
insurance for national banks. So a bank run is possible. During the US crisis
in 08/09 we had the Fed/Treasury complex insuring deposits and supplying
liquidity which they can do in infinite amounts. Euro-zone nations are not
sovereign and are at the mercy of the ECB. You underestimate the risk of a
breakup, the Euro is broken.

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quanticle
_Could this halt the ongoing initial public offering wave that has been
building in the tech industry for several months? What does this mean for
Internet companies such as Zynga and CafePress that are currently in the IPO
pipeline?_

I doubt it means much. At worst, it means a few months of delay while the
current crisis blows over. In 1998, people were wondering whether the Asian
currency crisis would halt the (then roaring) dot-com boom. Yes, there was a
damper on the IPO market for a few months, but the market came roaring back in
the latter half of 1998 and kept going strong right through 2000.

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rajpaul
The numbers after the close are less dramatic, except for LinkedIn.

NASDAQ -6.9% Pandora -7.6% Zillow -7.4% LinkedIn -17.4%

The article makes too much of this. Smaller companies are more volatile. When
the market goes down, smaller companies will be down more, and when the market
goes up smaller companies will be up more.

