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Globe and Mail: B.C. man rethinks buy-and-hold strategy

May 27, 2000, 19:43 (2 Talkback[s])
(Other stories by Tony Martin)

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"For Mr. Liang, IPO definitely stands for Immediate Principal Obliteration, given his experience with Cobalt Networks Inc. (COBT--Nasdaq, high $172 (U.S), low $22), a maker of Internet and Web hosting server appliances. "I'm a fan of... Linux, so I waited all morning for the [stock] to open on its IPO day," he says. "It was recognized as a major Linux company, and I had beat my head over missing out on Red Hat."

"(Red Hat Inc. [RHAT--Nasdaq], an early packager of Linux, was also an early beneficiary of the dot-com boom. When the company went public last fall, the stock traded at around $40 [U.S.] for a couple of months before rewarding believers with a fast rise to a peak of more than $151. Like many high-tech stocks, though, Red Hat has recently "blowed up real good," as SCTV would say, and is currently trading at around $17.)"

"He got into Cobalt at $147 a share, and the stock did indeed get up to a high of $170. Unfortunately, from that point it was downhill all the way, with the stock now trading at around $28. When you add in the fact that Mr. Liang sold Starbucks Corp. (SBUX--Nasdaq, high $45.25 [U.S.], low $19.87) at around $27 a share to raise the money to get in on the initial public offering, and Starbucks' stock in the interim spent a lot of time trading in the high 30s, you can understand why Mr. Liang is considering selling his Cobalt shares, and advises others to "Never buy shares on the IPO day."

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