The initial demand for these tech IPOs was tremendous. They were oversubscribed, and there were rumors that one was oversubscribed an astonishing 16 times. So what exactly is the problem? Institutional investors are lining up to participate in these hot deals and are swallowing the lion's share of the initial issuance. They are booking profits, and they are booking them early. It is not uncommon to see the entire deal size flipped on the first day (i.e., 5 million shares issued and a volume of 5 million-plus shares traded on day one). Institutions view these companies as opportunities for quick profits, not as long-term investments.
The bottom line is that these companies are unproven. Their income statements reveal that they are effective at growing top-line revenue, but ineffective at generating profit. Once the initial IPO hype subsided, the market took a wait-and-see approach, and the stocks have traded back to a more reasonable level. Wall Street is searching for the next Workday (WDAY) IPO, and it hasn't arrived ... yet. -- Written by Daniel Sweet, a partner at IPO Boutique. At the time of publication the author had a small long position in MRIN. IPO Boutique has no position in stocks mentioned. Follow @IPOBoutique This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.