In the late nineties, internet IPOs were all the rage. It was really easy for a company to go public, and most of them had a tremendous first-day pop. TheGlobe.com was one for the books: the first trade was 9x the target price. Everyone wanted in on IPOs back then, because it was a given that you would multiply your money in a few days. Friends-and-family shares were highly coveted, celebrities called executives to ask for shares. It was crazy.
One fine day in June of 1999 I was sitting at my desk, writing code, in the zone. My phone rang, I picked up. A friendly voice greeted me and started a sales pitch:
“Would you like to participate in the QuePasa dot Com IPO?” I’d heard of the company, it was one of the contenders to be the Spanish-language Yahoo back when Yahoo was the king of the net. I even used the site now and then.
My first reaction was:
But then I was like:
I was a lowly programmer. There were no blogs or Twitter. Not that I’m famous or anything now, but back then I was nobody. Why did they call me? I was working for a recently public company out of lockout, so it was safe to assume I’d have some money to invest. My name is Diego, so my odds of being interested in a Spanish-language portal were relatively high. In 1999 it was common practice to print the employee roster every week (including phone extensions) and distribute it to everyone. Those rosters were money to everyone who had something to sell, so obviously they leaked.
Ok, I understood why it would make sense to call me. Luckily I knew something about economics, so it was clear to me that celebrities were not lining up to perform sexual favors in exchange for this company’s shares. Clearly there wasn’t enough demand. Still, I listened to the pitch.
The IPO price was set at $12, at the top of the range. It was expected to go significantly higher. The only restriction for me would be that they didn’t want me to sell the shares within the first 30 days. I said I’d think about it and call them back, which of course I didn’t do.
A week or so later, the stock went public. So what happened?
The stock doubled in the first couple of days, and stayed in the 20s for a while. I was starting to think that I’d made a bad decision, but then moved on. At the 30-day mark I checked the stock, and it was trading at $6. During the 2001 crash it lost all its value. Interestingly it managed to survive and it’s still around in some form, you can read about it on Wikipedia.
I have never bought a stock at the IPO, and I don’t think I ever will. Being born and raised in Argentina, I have no interest in short-term investments. If you look at the volatility of most stocks in the few days / weeks after the IPO, it’s a complete gamble. I’d rather be playing poker. Or tossing a coin.