spotlight: shadow stock markets

shadow stock markets are private, unregulated markets in which investors can purchase shares in non-publicly traded companies prior to an ipo launch.  to participate in a shadow market, the securities and exchange commission requires investors to have a net worth greater than $1 million.  these "accredited" investors have an early bird investment opportunity before average investor demand increases the share price; however, the accredited investor is exposed to greater risk and uncertainty, as well as lack of liquidity and disclosure requirements from the company.

a very recent and relevant example was when goldman sachs teamed up with russian investor yuri milner and pumped $500 million into facebook. 

ah, the russians. of course.

bubble, bubble, toil and trouble?

linkedin. zynga, groupon, facebook. 

linkedin had an explosive first day of trading.  the company's offer price of $45 p/s catapulted to $122 p/s and is currently trading around $95 p/s.  the firm's market value nearly reached $9 billion.

there are other heavy hitters in the pipeline.  zynga is rumored to launch its ipo in the next couple weeks.  groupon's will be by the end of the year.  and the almighty king facebook will launch its ipo in 2012.

are these social media firms really worth it?  they have no organic product or service to sell - their economic value is generated from marketing other products and services.  are firms that coordinate information worth billions?  if so, why don't administrative assistants have higher salaries?

bring on the shorts.

zipcar ipo

zipcar, the car-sharing service, launched its ipo yesterday. the company had a target of $14 to $16 per share (p/s) - but participants paid roughly $18 p/s in the initial stock offering, raising $174 million, and shares rocketed to nearly $30 p/s once the offering was opened to the public, valuing the company at $1.2 billion. 

a few thoughts:

• why was there such a large price disparity between the initial stock and public offerings? did the underwriters flip the ipo or were they unaware of the demand?
• the service is very capital-intensive in an "infant industry" - but after ten years, the company has yet to post a profit even though its growth has been impressive. 
• should i invest in zipcar? after all, i am technically a "zipster" because i don't have a car and frequently patron the zipcar service. 

i love public companies; i'm weary of ipos, especially ones that involve short-term fads (looking at you).  i don't necessarily think zipcar is a fad, but i definitely agree that it's in a specialized, concentrated market. 

count me out for now, but i am intrigued and will look at the company's financials after a few quarters.  i'll be looking for a smaller expansion rate, glimmer of profitability, and the impact of market competitors.

one thing's for sure, i do like the ticker.