Imagine you have $20 to invest and one of two stocks to spend it on
Imagine you have $20 to invest and one of two stocks to spend it on. On the one hand, you have Company A, an established player with a significant, if shrinking, share of the lucrative smartphone market. On the other, you have Company B, an Internet darling with huge revenues but no profits.
So who do you buy? If you’re like most of the market last week, the answer is B, the online coupon giant Groupon. Last week, it raised US$700 million in an initial public offering—the biggest for a tech stock since Google’s in 2004. The offering was set at US$20 on Thursday; by Friday, its shares were trading above US$28, giving the company a US$13-billion valuation. Not bad for a firm facing questions over its accounting and skepticism about its potential for profitability. It’s the opposite story for Company A, Canada’s Research In Motion. As Groupon shares soared, those of the still-profitable BlackBerry manufacturer continued to slide. At some points recently, RIM stock was trading for less than the company’s book value of US$18.92 per share.
With service outages and the PlayBook struggling, it’s been a tough year for RIM. With a growing revolt from local business partners, Groupon, too, remains an iffy bet. Perhaps the smart move might be to put that $20 in the bank.