So, if Yelp and LinkedIn ultimately worked, what's the fly in the ointment? First, Amber Road is a relatively unseasoned company with fast revenue growth that's losing a lot of money. That's fairly typical of these deals. The public's appetite has been whetted, but not that many months down the road it is likely that there will be a secondary offering that comes well above the IPO price. That alleviates the tightness and tends to send a company's stock down almost instantly.
Take the trajectory of FireEye (FEYE - Get Report). Here was one of the hottest stocks in the universe. It's an acknowledged leader in security software for the enterprise. Its software actually flagged the security issue at Target (TGT).
It had been a huge winner trading all the way up to $96 not that long ago. Sure enough, just when the stock spikes to that level, the company files a 14-million-share secondary enabling insiders to cash in and the stock gets clocked instantly, with the deal ultimately being priced at $82.