Recent Tech IPOs
The fact that Twitter (TWTR) gapped up more than 70% in its recent IPO is great for those early-stage investors who made a fortune on this social media stock. But for those who were left to buy it on the open market, there has been nothing but froth — and a serious risk of collapse.
Consider that by some estimates, Twitter is trading for more than 200 times forward earnings. Also consider RBC’s $33 long-term target and “buy” rating was immediately dwarfed by the first moments of TWTR stock trading, and that Pivotal Research has already put a “sell” rating on Twitter with a $30 price target on fears it has been grossly overvalued out of the gate.
It’s not just Twitter stock, either. Tech IPOs are seeing their biggest one-month returns since the dot-com days as frenzied investors bid them up rapidly. Recent high-fliers include 3D printer Voxeljet (VJET), which has soared 300% from its October offer price of $13, and China Internet stock 58.com (WUBA) that almost doubled from its $17 offer price just a few weeks ago.
If you’re thinking of chasing tech IPOs, think again. These kind of valuations are great for early investors who were in on the ground floor … but those retail investors buying on the secondary market could be entering these stocks right before the bubble bursts.