Date: November 11, 2013

Twitter & How to Play Hot IPOs

Last week, Twitter began trading in one of most highly anticipated IPOs in years, very similar to Facebook. You can view my very negative initial comments here.

“Hot” IPOs like Twitter and Facebook are usually very emotional and as I have discussed over and over, emotion in investing can have a very detrimental impact on your portfolio! I went back and found similar IPOs to show you what transpired over the coming few months. The results should not be surprising.

Facebook had all kinds of problems right out of the gate and you are welcome to search the archives on the blog for my very opinionated view. As you can see, it was almost straight downhill for four months before THE bottom was hit.


LinkedIN is next and similar to Facebook, there was immediate and significant weakness before a good low was seen.


Just like with LinkedIN, Groupon experienced the ole buyer’s remorse right from the start with the first meaningful trough coming about a month later.


Yelp bucked the trend somewhat with only a shallow initial pullback, but the stock didn’t escape the carnage as you can over the first three months.


Zynga was just like the others with an immediate month long decline to a good trading low.


Google is below and this is certainly not a social media company like the others. But at the time, it was an incredibly hot IPO. It was also during a very different investing climate back in 2005 with vastly different results. It does not belong in the group above, but I figured I would answer the question before it was asked.


The moral of the story is that most times, investors are rewarded by having patience with hot IPOs. Personally, I would rather be late and pay up than be early and lose a lot of money.


Paul Schatz, President, Heritage Capital