Who's Nibbling at OpenTable?

Unfortunately for current OpenTable investors, the company is worth about 65% less than it’s currently trading at in the market.

This is explained in good part by the fact that you can’t short the stock and there are no options as yet since they just came public. But all this does is delay the inevitable decline to much lower prices before new long-term investors can buy shares.

We saw the same head-scratching results when Netsuite (N) came public early in 2008. The shares amazed everyone by trading at $40 (our Netsuite pre-IPO report suggested they were worth $12.)

Of course Mr. Market is not perfect, but who is on the other side of this market, buying the shares at these levels? Have they done any valuation work? Since there is no research available from the brokers yet, are they hoping for the impossible which would be a “buy” recommendation at these prices?

The road ahead is fairly well known which is a few months of price declines as brokers come out with their “hold” or absurdly tenuous “buy” ratings, short-sellers are able to borrow shares and the huge piles of VC shares escape the lock-up and come into the market.

Disclosure: At the time of this writing Research 2.0 has no position in the shares of OpenTable.

Comments

[mbogosi:]

Looks like OPEN is a relatively solid business and will genenrate new business in the future. However, I agree with you that the current price is absurd and after all the VC's and rediculous speculators are washed out we'll have something in the range of 10-15$ stock. Once it reaches those levels, I would consider recomending a buy.

May 31 03:17 PM

[ECONOMICS 101:]

Cosmo Mannella of LIUNA says it is too early to predict the future of Open Table.

$40/share with no proven EPS is crazy!!!!

I agree with mbogosi and say "wait and see".

By Johnathan Vrozos
johnathanvrozos.com
johnathanvrozos.ca

Jun 01 08:05 AM