What I learned (again) from the Pandora IPO
Sometimes you need a situation outside of your own day to day work environment to remind you of what you already know. Here’s my latest story.
Yesterday, Pandora, the absolutely fabulous internet-based music recommendation and streaming service, IPO’ed on the NYSE at the price of $16 per share; more than double what the market expected it to fetch 60 days ago. I love Pandora’s service and have been a fan since the early days. I am paid subscriber and a major advocate. I never miss an opportunity to tell friends and family about this service and how terrific I think it is.
When I saw they were going to IPO, I felt that I just had to own a piece of this company which I believed in so much and enjoyed using. What’s more, given the craze I saw for LinkedIn and the markets appetite for tech-based shares in general, I was sure I was in for a quick profit as well. Given that my investment capabilities aren’t quite of the level that gets me access to the pre IPO allocation of shares, I had to wait like the rest of the general public to buy shares when the stock started trading today. Here’s where the story gets interesting.
I’d spoken about this investment idea with my insightful and careful financial advisor, Norman Chait, who was rather lukewarm to the idea. Norman’s philosophy is first and foremost conservative. He isn’t much of a fan of individual stock picks. Instead, he makes careful picks of fund managers based on his research and industry knowledge. At any rate, I sent Norman an email telling him I wanted to buy 400-500 shares at the open and to ride it up for 25-30% increase which I expected to have in the very first day. Norman responded with a number of hesitations but gave in to my pressure requesting (a) that we limit the order to 200 shares, and (b) that a market limit be placed on the order at 18 in case the share price ran up at the open.
Well, sure enough the market did exactly what Norman said it would. It IPO’d at 16 and quickly went up to 23 and then ended the day below 18; far below my expectations and that of many others. Had Norman followed along with my energetic and enthusiastic desire to purchase this stock, I likely would have been fulfilled at 23 and been sitting on an opening day loss. Thanks to Norman’s wise intervention I was never fulfilled on the order and I got to sit on the sidelines while the losing ride was suffered by others.
So what’s this all got to do with IT Leadership? Simple, I violated my own rule, secret number 6 in my own book: “Be Skeptical.” What I know so well to be the case in the world of IT project delivery, I failed to translate to my personal life. I know that in the world of IT projects vendors and gung ho project managers love to make promises to the end user community about how great things are going to be with the new system. And I constantly counsel my clients to be very skeptical. I put in place as many risk mitigation elements as possible. But here I was in my own investment decision making behaving in the same gung ho manner. Acting like a fan of the technology and not a considered investor.
So for me the Pandora IPO (and every time I use Pandora) will be a reminder of secret #6, “Be Skeptical.”
