The Top Ten IPO Candidates For 2010 | Hacker News Reader

The Top Ten IPO Candidates For 2010

techcrunch.com

23 pointsedw51911 comments

"Why would you invest in GM IPO if you could invest in Tesla instead?"

One reason may be that you think GM is underpriced and Tesla is overpriced. Techcrunch ought to hire people who are financially literate if they are to report on finance.

Well, technically you're right. However, GM is a massively speculative play, and not an investment in the least. Their business has been declining for years, they're no longer profitable, and they filed for bankruptcy this year. They don't even trade under the GM ticker symbol anymore, they're now "MTLQQ" (Motors Liquidation Company) ever since they went bankrupt.

The only reason you'd (or at least I'd) buy GM is because you believe their assets are worth more liquidated than the stock price implies. Tesla, on the other hand, shows tons of promise for actual revenue growth.

GM's 2007 high share price: ~$42. 2008 high: ~$29. 2009 high: $4.15. Currently trades for 49 cents.

I'd say the author's point, that GM is a total stinker compared to a profitable company like Tesla, is still correct, and shows much more financial literacy than you give him credit for.

This is incorrect.

MTLQQ is not really GM. GM's valuable assets (the car making and whatnot) have been transferred to a new private company that is owned by the "old GM's" debtholders.

This "new GM" is planning an IPO in 2010. It will be a reasonably healthy company and a real candidate for serious investors.

So if the author is talking about investing in MTLQQ, then he is totally clueless.

Ah, you're right, I misread the original statement. I still think an investment in the "new GM" will be a riskier and more speculative play than an investment in Tesla, which is already profitable, but that's just a difference of opinion.

On another note, your tendency to end every comment with a rudely worded ad hominem disturbs me.

There are two approaches.

(1)Invest in companies that are under priced. (2)Invest in companies that are great (growth) companies. There is logic to both. One might even argue that if you find the logic of option 1 compelling you should get out of the stock market.

It seems natural that Techrunch, from the tech/startup/IPO/disruptive technology world finds investing philosophy 2 compelling.

The idea of another "Netscape moment" and a "halo effect" seems like wishful thinking to me. The internet industry has matured, expected ROI is more easily measured, and less subject to investment hype.

I interviewed for the Gilt Groupe about 2 years back. Got to the last interview, but bounced over a visa problem.

I'm not sure I was ready for it at the time though. I cringe when I look at the code I wrote back then (eventhough I had quite a bit of experience). Not sure how it reflects on them that I got so far along in the process as a senior developer.

I understand that companies like Facebook and LinkedIn need a lot of money for fueling growth before they can become profitable to solve the chicken the egg problem. But why would a company such as Etsy need 30 million dollars?

Also, is it just me or does it seem like these days creating a solid profitable business is no longer cool?

Why wouldn't sacrificing profit for growth make sense for Etsy?

This is also just a theory, but this could be perhaps why many web companies choose to pursue growth over profit: if you want to attract the brighest developers, you have to give them interesting problems to solve. A simplistic webapp could be profitable with a small userbase, but they wouldn't have the challenges (scalability, search relevance, machine learning for ad targeting and collaborative filtering) that could attract a top-notch engineering team.

Entrepreneurial hackers are quite different from most business owners in their motivations are quite different. Top technical talent usually isn't very motivated by money alone and hates being underutilized. A small (even profitable) business wouldn't generate that much money for developers anyway. Founders could find a way to cash out from dividends, but that would leave employee engineers with nothing (or at the least, with nothing more than what four years of routine bonuses at Google would bring) to show for years of working long hours on tedious and technically un-interesting problems (which many times still happen to be the problems that customers want solved).

A competitor could delay profitability in the short term, attracting not only a large user base but also a talented team that could execute on a much more scalable monetization approach (e.g. self-serve advertising vs. brand advertising, SMB/consumer products vs. enterprise products).

Incidentally, from what I've heard, before Facebook began seeing serious growth and went beyond being a simple database driven web application (appearance of Thrift and the ability to write back-end services in Python, C++ and Java), they had high turnover in engineering. I'd imagine the fact that they were recruiting top talent but putting them to work on routine web development contributed a lot to that. Of course with the scale Facebook operates at now, the simplest web development tasks are quite challenging.

That being said, companies that start out solving "unsexy" but financially lucrative problems could grow to be billion dollar companies (e.g. SAP). Philip Greenspun has a really interesting piece on this topic (see the third "good reason to start a startup"):

http://philip.greenspun.com/business/startup-tips/

Question is, what would these start-ups have to do to attract talented technical employees (as opposed to founders, who have the lure of "fuck you money" or talented sales/marketing employees who are passionate about customer building a profitable pipeline and closing valuable deals)?

Sources of income are ad revenue and niche market consumer sales it looks like. No surprises.

interesting that rearden got a mention and a certain other travel technology company did not :)

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