THE ASTOUNDING SIMILARITY BETWEEN THE YAHOO IPO AND FACEBOOK IPO CONTINUES TO BE…..ASTOUNDING
On August 2nd, I published an information piece titled "Facebook Is The Next Yahoo And That Makes It Very Bullish." In the article, I outlined the similarities in the price characteristics of the Yahoo and Facebook IPOs in the months following their debut.
My purpose in publishing this information was to remind investors that IPOs do not always go as planned. This is irrespective of the fact that a company may be a thought leader, technological innovator or godsend from the planet Kepler. There can be market forces at work that demand investors are put through a period of adversity before the light can shine and flowers are given permission to bloom.
Just because such an obscene and heinous event takes place does not mean there is a vast conspiracy against any class of investor. It also doesn't mean that there were criminal elements at work within the underwriting syndicate or within the company itself. Investors have become surprisingly quick to throw around these types of conspiracy theories without much thought.
We are living in an era of skepticism and cynicism pertaining to anything Wall Street. Just as 12 years ago, we were living in an era of Wall Street being the holy grail to wealth and independence, with promises of double digit portfolio gains that would span generations to come. Both frames of thought are incorrectly influenced by the emotion of fear and greed surrounding that particular time.
Furthermore, the pitiful versions of fundamental analysis that seem to grab a hold of unimaginative minds can only cost you when related to dynamic companies that have the eyeballs of the world transfixed. There is no bell that will ring in the form of a ratio or valuation that will determine when Facebook is a buy. It didn't ring for Yahoo, Amazon or even Google, a company that created nothing but doubt among both institutional and retail investors on its IPO date and for many months to follow.
The first chart is that of YHOO 80 days into its IPO and FB 80 days into its IPO. The similarities are obvious.
The second chart shows where YHOO is trading a year and a half after its IPO date.
I expect FB to pull off something similar. It will make little sense. It will be criticized the entire way up. And that is exactly how its supposed to be.
click chart to enlarge
YHOO vs. FB 80 days into trading
YHOO 1.5 year into trading
