Shares of Chinese online video provider Youku (YOKU) fell 16% on Thursday, when the company reported a quarterly loss. The company is expanding spending in a measure to fend off competition from other companies in the industry. Also, the company was predicting revenue growth of just 90 to 100% in the fourth quarter, down from a 129% gain in the third quarter.
Youku's fall hit many of the Chinese names on Thursday, and the losses continued on Friday. These names, along with several other highly hyped IPOs from over the last year or so, have greatly underperformed and are well off of their highs. Take a look at the following table to see how badly they have done.
|Name||Current||IPO Date||IPO Price||Change||High||Change|
Youku is the only one of the five that remains higher than its IPO price, but that's not comforting considering that many individual investors couldn't get in at the low IPO price. Youku did have a great run. After a monster first trading day, the stock settled in just above $30, and traded below it a few times. Then it made its quick and sharp run to $70, but that rally was short lived.
Dangdang (DANG) and Yandex (YNDX) both hit their highs during the first few months of trading, and Yandex has held up the best-- but I use that term rather loosely. Dangdang has been the worst. Renren (RENN) dropped right at the beginning, and Tudou (TUDO) did the same.
If you are looking to enter this space, I'm not quite sure these five names would be the place to look. I'm still a fan of Baidu (BIDU), the largest name in the space. Baidu lost 8% over the past two days in sympathy, and is looking quite attractive again. If these names continue to drag down Baidu, it might fall back to that $100 level we saw in early October, but I sure hope Baidu can weather that storm. Baidu lost a third of its value in that decline thanks to competition and censorship warnings with fellow internet company Sina (SINA). Sina lost half of its value in just three weeks, dragging down the rest of the sector with it. I'd still be a buyer of Sina over the five names above, but Baidu would be my first choice.
We've seen a lot of these hot, hyped IPOs fall flat on their faces. In fact, concerns over investigations of their accounting and other issues have been prevalent for the past couple of months. Investors really need to do their due diligence when buying such stocks, and sometimes the info is not always out there. Unfortunately, you can't always expect revenues to grow 100% or more year over year. Growth is always a challenge, and when a company does not achieve it, the stock sees these kinds of falls.