Think About It. Open Sesame. With the company logo blazing through pillars of the New York Stock exchange early two years ago, the world prepared for what was expected to be the biggest Initial Public Offering of a “security” ever. Nearly twenty years ago we were discussing stocks around the water cooler at Wade’s radio station in Elwood, Indiana. My better angel, Sage Thyme launched into a gentle tirade of concern. Is it possible to feel comfortable while holding significant shares in a company with no “bricks and mortar” or visible means of support, i.e. profits? There were blank stares from his listeners while the investment world remained agog at the growth of the World Wide Web and the hundreds of opportunities to get rich purchasing stock in these sure bets. The point our seasoned friend made was that it was indeed gambling, not investing. Three years later, the financial lives of many were shattered along with their dreams of wealth and assurance of wisdom. After hundreds of start-up wizards and the banks made fortunes, individual and institutional investors took it hard.
Some wondered later why they weren’t scared by Boo.com, which garnered $200,000,000, spent $180,000,000 in six months trying to build an on-line fashion store, and was bankrupt by May 2000. (Remember when we were impressed by Millions not Billions?) Yes, there were billionaires made those days. Mark Cuban got his start by selling Broadcast.com which now redirects to its owner Yahoo, with no other apparent function in business life. There were many more, but let’s quit with what was called the “Ultimate dot-com startup” which went out of business in 2002. It was called Startups.com. The name has popped up again with an opportunity for you to contribute and even gain equity in their hopes for the future.
A few years ago Yahoo made a big gamble on a little known Chinese company call Alibaba. If all goes well, their net worth will increase dramatically on paper, along with a cash uptick of about $8billion as they sell part of their share in BABA at an anticipated $68 dollars with some predictions of a quick jump into the 80s. New CEO Marissa Mayer and her stockholders will be pleased I’m sure. What are your plans?
Checking with my extraordinary grandson Austin, I found he had only a vague recollection of the old story. Is there any way the startup’s Chinese founders would not have had a slightly more than inscrutable grin at the irony of the thought of Ali Baba and the 40 Thieves? In all fairness, this company has been around for fifteen years, rounding up funds, purchasing companies strategic to their plans, actually selling things, and (horror of horrors) actually posting priofits. Who knows what the future holds?
UPDATE. It opened at $92.70, the biggest IPO in history. Before the bell this morning, it was $81.93. Hmm. We wish them and you well in all of your investments. But be careful it’s not Pandora’s Box when you say Open Sesame. Think About It.