I've spent the better part of my trading career trying to get into the heads of the sellers. The problem is that most of the sellers I have come across have been of the institutional variety. I pretty much know how the mutual funds play things. Hedge funds? I know those, too. Takes one to know one there.
But this market doesn't lend itself to that kind of easy analysis. In this market, you have to get into the heads of the venture capitalists and figure out what they are going to do. Mistakenly, traders presume that the VCs are always sellers. That's just plain wrong.
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Message Boards. Sometimes they are, and sometimes they are not. Some have more of an inclination to bail than others. Some are strictly short-timers and others want to see their investments grow to fruition.
. The Street, meaning the consensus view of guys like me, pretty much figured that the VCs who started it and the VCs behind the companies that got bought by Yahoo! would all head for the hills at first light. They didn't. They didn't bail. That's how you got outsized gains in this one. Why didn't they? I have one theory: They all loved Yahoo!'s business model and its management. They genuinely bought in.
Now let's take
, two stocks that have been in free fall of late. My take is that the VCs here have been much more willing to go. Maybe they don't like the business model or the execution. I don't know. But all you did need to know about these stocks were that the VCs bolted.
So, where does this take us to? I would think that we are going to get more sophisticated about who owns stock in a company when we make our bets. I think we will soon be gauging venture capitalists as inclined to bail vs. long-termers. We will begin to see that certain venture capitalist-owners are a red flag. Others are money in the bank.
I would hope that news organizations would point us toward who has the propensity to sell. It will become an important piece of the puzzle. For example, I think that the betting line on the Street is that the VCs will all bail from
as soon as possible. But what if they don't?
To me, that is a more important piece of information than any 10 press releases that Commerce One might put out in the next few weeks.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo!. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at