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September 28, 2006

Tech IPOs Doing Well - Divx, Inc. Up Again, ShutterFly, Inc On Deck

posted by MR WAVETHEORY at 9/28/2006 02:54:00 PM

Tech IPOs have been flying off the shelves lately. DivX, Inc. (NASDAQ DIVX), makers of digital video compression software, gained another 8% today (+1.73) to close at $23.36. The post IPO performance has been well received largely due to the MySpace, YouTube, FaceBook craze going on. Since its IPO at a price of $16, DivX has gained close to 50% from its initial offering price.

In my view, retail investors are really the drivers on the huge price gains because they also happen to be most familiar with the product. It is hard to tell when a stock will have had its run, because stock prices usually run in the direction of over optimism and over pessimism. Once something has momentum, it becomes a must own name for everyone - remember Google? It also ran up from under $100 to over $400.

What makes things interesting is the difference of opinions that everyone has on the survivability of Web 2.0 companies. Mark Cuban for instance thinks that "only a moron would buy YouTube." Mark's big bank account proves that clearly there are morons out - apparently somebody bought Broadcast.com from him not so long ago! Mark thinks "There is a reason they haven't yet gone public, they haven't sold. It's because they are going to be toasted." I'll toast to that! He's right about one thing though, "What makes viral so special is it's so hard to do. It's so hard to plan. It's hard to stand out."

With all this hubbub about Internet IPOs, there is now even talks of whether the bull market is back, in of all publications, the Red Herring! If DivX continues to perform well, it may be quite possible to see more Web 2.0 IPOs. I would venture to guess that there are many opportunities out there. ShutterFly, Inc. is pricing tonight and the outperformance of DivX could give the ShutterFly IPO a boost.

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