Seeking Alpha
Profile| Send Message|
( followers)  

I am not as obsessed by the Youku.com (NYSE:YOKU) as it currently appears; I am just fascinated by human herding behavior. And I can't recall a valuation like this since 1999... I recall a lot of high growth tech stocks trade at 3-4x sales.... and a lot of high value takeover prices are at 6-7 sales. At the peak this morning of $50, investors were giving this company a $5 billion valuation.... or 100x sales.

It's all fun and games until someone pokes your eye out with a pirated copy of Jersey Shore ("so this is how the Americans live!? A Snooki would be shunned in China. We're sending our money to these people? What a Situation!") Once these things turn it is a game of musical chairs... the music stops, and suddenly you realize there are only so many bathtubs full of Kool Aid to sit in. The stock is down more than 20% from the high of the day and 7% for the session. The pathetic thing is this could drop 90% from the high of the day and still be considered expensive by normal valuation methods.

Big picture, this is a good lesson for any newbies to the market about how all the things you are told the market is about, means zilch in the near term. Sentiment, human behavior, greed, fear - all that jazz means much more with certain names, in certain time durations. I am sure almost no one in Youku.com has ever been to the site, and 90%+ did not bother to read up its documents on the SEC website. To trade a Youku long or short you need all sorts of Antacid.

Intraday Chart

(Click to enlarge)

Disclosure: No position

Source: Live by the Youku, Die by the Youku