Only excitable rubes buy Internet IPO shares on Day 1

Pandora Media set to go public Wednesday; investing public set to go nuts

So you can't wait to scoop up shares of Pandora Media when the Internet radio company goes public on Wednesday?

Well, curb your enthusiasm. Odds are you'll be buying shares that are vastly overpriced and destined to drop steeply in a few days. And they may not ever climb back to the price you paid for them, at least not anytime soon.

(Also see: LinkedIn shares nearly triple in IPO debut)

The thing is, you can still buy shares of Pandora -- which will trade on the New York Stock Exchange under the ticker symbol "P" -- on Thursday. And Friday. And next Monday. And each day the shares should be a little less expensive.

That's the nature of IPOs in heavily hyped sectors. There's a big opening day and then a slow fizzle. And the only ones who make a decent killing are the underwriters, the pre-IPO shareholders and Wall Street insiders who get shares at a discount.

Here's a look at three Internet IPOs this year and how shares have performed since their ticker debuts:

Demand Media (NYSE: DMD)

IPO Date: January 26

Offer Price: $17

First-day high: 25.00

First-day low: 22.03

Monday's closing price: 13.14

Thanks to an upgrade from Goldman Sachs, Demand reached as high as 15.48 on Tuesday, which does little good to anyone who bought the stock on Day 1. Shares have been trading below $20 since April 18.

If you were one of the lucky people to pay 25.00 for DMD shares, there have been three brief moments when you could have sold your shares and made a sliver of a profit. DMD's highest price was 27.38, which it hit on April 6.

LinkedIn (NYSE: LNKD)

IPO Date: May 19

Offer Price: $45

First-day high: 122.70

First-day low: 80.00

Monday's closing price: 75.27

The LinkedIn IPO was much bigger than Demand's, as the offer price indicates, and could have set the stage for a bout of moonshot mania. Let's hope not, because the defining characteristic of irrational exuberance is irrationality. Speaking of which, how'd you like to be one of the people who paid 122.70 for LinkedIn shares on Day 1? Those probably are underwater for good.

Yandex (NASDAQ: YNDX)

IPO Date: May 24

Offer Price: $25

First-day high: 42.01

First-day low: 30.55

Monday's closing price: 31.33

"Russia's Google," as Yandex often is referred to, hasn't been above $40 a share since its first day on the Nasdaq, so investors who jumped in on the high end have been underwater since. First-day investors who got in at 30.55 have remained in the black, but with shares closing below 32.00 for three consecutive days, their window of modest opportunity is vanishing fast.

Of the three Internet IPOs above, Pandora's is most like LinkedIn's, at least in terms of hype. Consequently, investors who want to own shares of Pandora for more than a day would be best advised to stay on the sidelines Wednesday.

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