The financial media continues to ponder the question “is Facebook worth $100 billion?” and its sponsoring Wall Street institution has already shut out the individual investor with prohibitively high private placement amount minimums. In response, we remind you of our mantra that has served us well since the last IPO bubble.

“With an IPO, when you want shares, you can’t get any and when you can get some, you don’t want them. But if you want to attain IPO-profits, you’ve got to circumvent their system.”

Even the relatively small Internet-IPO’s on the horizon will soon tempt you away from our profit proven Anti-IPO strategy such as the high profile of Twitter and its recent but relatively low pre-market valuation of $7 billion. This temptation to chase the big names after they launch into the active stock market is understandable but also puts you at a disadvantage. When you buy these stocks on the opening, you’re buying them from the subscribing institutions at a much higher opening share price - hence, you’re providing the likes of Goldman Sachs with instant profits while you assume all the market risk.

During this next round of Internet-IPO frenzy, we will continue to guide you to the Internet stocks with prices below company revenues and cash per share. Most of these companies are lesser known names but their shares will be among the next group of buy-out targets when the Internet behemoths open their checkbooks to maintain their lofty growth rates. Yet, when human nature to chase the hype gets the best of you, we implore you to stick to the following rules and the strategy playbook included in this month’s guide:

The Law of Contrarian Investing around Initial Public Offerings:

•Do not invest in the pre-market or subscription shares of a pending IPO.

•Do not buy shares of a newly issued company within its first 30 days of public trading.

•Wait to buy your initial shares of a recent IPO issue until after the penalty bid has been lifted around the 31st day of
public trading.

•Sell your shares of a newly issued company 60 days before the first unlock date.

•Delay re-accumulating your shares until at least 60 days after the first restricted stock unlock date and only if the unlock ratio has been reduced below 30%.

•Review the details of the company’s next restricted stock unlock date, especially the amount of new shares to become free-trading, and compare the placement price with the current market price to determine the degree of pending sell pressure that could hit the share price.

Groupon, Inc. (GRPN: NASDAQ) is a very appropriate fit to our anti-IPO strategy. From Reuters Online:

Groupon shares sink below $20 IPO price

(Reuters) - Shares of Groupon Inc fell for a third day on Wednesday, sinking below the company's initial public offering price of $20 less than three weeks after the daily deal company went public.

Groupon's shares fell 14.2 percent to $17.22 on Nasdaq, bringing its decline over the last three days to about 34 percent.
Groupon raised more than $700 million in an IPO in early November, making it the biggest IPO by a U.S. Internet company since Google Inc raised $1.7 billion in 2004.

Analysts have cited concerns about increased competition, a greater availability of the company's stock for short-selling, and a sharp reversal of market sentiment that is taking down more speculative companies.

"The momentum is negative now and it is likely to continue negative until they have something positive about the company," said Edward Woo, a Groupon analyst at Wedbush Morgan.

"There was a lot of negative sentiment heading into the IPO, the IPO surprised a lot of people, it was much stronger than expected," he said.

One reason for that strength was the fact that Groupon sold only about 6 percent of itself in the IPO, creating a scramble for the stock. It was one of the lowest floats of the past decade.

LivingSocial, Groupon's closest rival, which is part owned by Amazon.com Inc, announced plans on Monday to offer more than 20 deals with national merchants over the crucial Black Friday shopping period.

Daily deal companies often subsidize national deals, making them less profitable than offers run with local merchants. The national deals usually bring in lots of new customers, but put pressure on profit margins.

Analyst say Groupon shares were also lower because it became easier this week to short, or bet against, the company.
In the first week after the IPO, there was little stock available for short sellers, who have to borrow shares before they can sell them. If the stock drops, they can buy it back at a lower price, return the shares to the lender and pocket the difference as profit.

Woo has a price target of $22 and a "neutral" rating on Groupon's stock. He says that may come down if the stock is not able to bounce back soon.

"It is a little surprising at how quickly it's happening," said Woo. "But on the other hand the valuation was very high to begin with." January 17, 2012