IP Uh Oh

Is OpenTable a Cautionary Tale for Tech Stocks?

opentable Is OpenTable a Cautionary Tale for Tech Stocks?

Ride the wave

There has been plenty of talk in recent weeks about internet IPOs and the danger of trying to ride that roller coaster. Many stocks saw a huge rise on their first day or week, followed by a steep fall.

But over at Fortune, Kevin Kelleher points out that this kind of swing in momentum seems to effect tech stocks well outside the bubble.

He notes that New York based OpenTable, which went public in May of 2009, enjoyed a great climb to $118 in April of 2011. But over the last eight months the company has lost 67 percent of its value, settling at a little under $40.

It’s not that there has been a fundamental shift in how OpenTable’s business is doing. It’s just that internet stocks are prone to periods of huge growth and become favourites among momentum traders.

As the companies mature, this growth slows down, and that’s when the share price takes a plunge. ” It doesn’t take a stock bubble on the scale of the 90s dot-com mania for investors to lose money on a supposedly hot Internet stock.”

Betabeat doesn’t see what all the fuss about. Investors could also have taken a bath in the last two years investing in financial stocks or trying to predict the price of oil. Are internet stocks more volatile than the rest of the market? Typically. But that’s the tradeoff for explosive growth.

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