Internet Bubble Reaches Japan?

from the repeat-after-me:-big-IPO-bumps-are-a-bad-thing dept

The final proof that a new internet bubble has arrived is the fact that we're back to explaining why a huge stock bump on the day of your IPO is bad. It means you got screwed out of a lot of money. Unfortunately, too many people assume it's a good thing -- showing that there's a lot of demand for your stock. The problem is that the company doesn't capture any of that money. It's all captured by the folks trading the stock. The company sold all of the stock it was selling at the original IPO price. This was common in the US back in the bubble days, and used to lead (stupidly) to companies being excited about just how much their stock popped in the first day, without realizing that every bit of that pop was money that was left on the table. Last month we saw it happen again when Chinese search engine Baidu had their bubble-rific IPO, jumping nearly 500% in the first day. That's nothing, though, compared to (the article calls it, but that's a different site) -- apparently the Japanese version of It debuted today in Japan and promptly jumped 727%. To put in perspective just how ridiculous this is looking, the company raised a grand total of $17 million out of the IPO. That's not all that much, right? Thanks to the stock pop, though, the company is now valued at a whopping $1.24 billion. That could be okay if the company were rolling in cash, but it only had revenue of $20 million for the entire last year. Meanwhile, especially in an age of blogs, it's not as if the idea is all that defensible. With an IPO like that, you can pretty much bet that others in Japan are actively working on clones of the idea. Looks like the internet bubble is alive and well in Japan. Of course, it's a bit odd that the only news source that seems to be talking about this event is the Red Herring link above. Considering they got the name/URL wrong, it makes you wonder if other details are wrong as well. Red Herring also fails to mention that the VC investor in the company who they quote just happens to serve on the board of Red Herring.

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  1. identicon
    dorpus, 15 Sep 2005 @ 8:48am

    The Whole Story

    This article is saying that All About is not selling any public stocks. i.e. they are listed, but the stocks are only sold to special people like gangsters or politicians. Ordinary investors are not allowed to make money in Japanese stocks -- bankers will sell them at a loss, give the profits to gangsters, and tell investors that there were "processing fees". American banks entered the market in the late 80s to (presumably) offer more competition, but American banks have been specializing in tricking Japanese companies into worthless investments by giving them bullying talk about "global competitiveness", etc.

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