E-Mailbag Monday: Shorting IPOs, After Hours Trading and Akamai

Thanks for the article on changes to the IPO environment. (A late read on
my part, but that’s what vacations are supposed to be about.)

Quick question: In addition to the quiet period following an IPO (25 days,
as you reported), there is also a moratorium on short-selling. Is this
also 25 days? I’ve heard many different numbers.

— Allen Clark

Reply: There is no equivalent “quiet period” rule for shorting an
IPO. However, there is the following limitation. That is, in order to
short a stock, there must be stock certificates available to borrow and
then sell on the open market. In an IPO, the stock certificates are
not delivered for a few days, so it is impossible to short an IPO within the
first few days of the offering.

Rolling the Dice After Hours

Hi Tom:

What do you think of after-hours trading? Does it make sense?

Reply: The answer depends on the type of investor you are. If you
are a long-term investor, then buying in after-hours is probably not a good
idea. So far, there has been little trading volume and thus, you are
likely not to get a good price for your stock. Then again, if you are a
daytrader, there are definitely opportunities to make money off the
volatility. What’s more, there are typically many key announcements after
the market close (earnings announcements and so) — which can create even
more volatility in after-market trading.
But such strategies are really for the professionals.

Those firms that allow after-hours trading include: Datek, Schwab,
DLJDirect, TD Waterhouse, E*TRADE , Discover and Dreyfus.

The Next Big IPO

Good call on Sycamore Networks. What is the next big networking stock?


Reply: Thanks. Like Juniper Networks and Foundry Networks, Sycamore
reached an eye-popping valuation on its IPO — $14.4 billion to be exact.
The stock was priced at $38 and reached a high of $270.88, until it closed
at $184.75. I wrote about this company in last week’s

The company is in the so-called infrastructure space, which has been torrid
this year.

So what’s the next one? Akamai looks like a worthy successor.

The idea for this company originated with Tim Berners-Lee,
who is the inventor of the World Wide Web. He dared his colleagues to find
a way to deliver content faster. F. Thomson Leighton took the challenge
and spent much time with advanced mathematics to find a better solution.

By February of 1998, he started Akamai and as of April, 1999, the company
launched its product, FreeFlow. Here’s how it works. A company will
designate certain areas of the site for fast downloads — such as for icons,
graphics, videos (called “Akamaized” content). When a page is loaded, the
tagged content will be handled by the Akamai servers — optimizing the
content based on geographic proximity, performance and congestion
parameters. So far, the results have been impressive. Yahoo!, for
example, had a 50 percent increase in performance on its ad banners.

Akamai now has 49 customers, such as VerticalNet, About.com and CNN

The company has entered strategic agreements with Cisco ($49 million ) and
Microsoft ($15 million investment).

Here are the valuation metrics:



pro forma IPO


Shares offered


Price target/actual




Shares out



IPO market cap


less working cap


plus LTD


Enterprise value


1999 Revenues


1999 Losses


Annualized rev.





Revenue multiple


Rev. multiple


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