THE DAY AHEAD: Confessions of an IPO cynic

There's been a running joke around the office when it comes to reading The Day Ahead's IPO-related columns. Take The Day Ahead's position on an IPO and make money doing the opposite.

If an initial public offering gets ripped in The Day Ahead, buy it. If it gets kudos, don't go near the thing.

Some of our readers have continually blasted me for ripping a company such as Bamboo.com only to have it shoot up 100 percent or so on the first day. Nevermind that the offering was priced to sell cheap.

Have an opinion on this?

So we decided to take a look at some of the more recent IPO columns and how wrong or right we were.

One thing to consider: Your time horizon. If it's four hours you're probably in the wrong place. If it's a year this column may make more sense.

See we use this funny thing called logic, which often doesn't apply to the markets. When you apply logic you'll find Bamboo.com (Nasdaq: BAMB) is based on a business model with no revenue and a guy doing 360s with a video camera. LookSmart Ltd. (Nasdaq: LOOK) is just another portal. Musicmaker.com (Nasdaq: HITS) doesn't strike any chords at all. Of course our thinking is colored by those regulatory filings (yes, we actually read them).

Another thing to consider: whether you can get in at the opening price. If you're among the lucky ones that get an IPO at the offering price you'll usually make a quick buck no matter what happens. Since most investors don't get that price, we look at the long-term (more than four hours).

Bottom line: With some fancy accounting and appropriate hedges we're on target about IPOs about half of the time -- the equivalent of a coin flip. And given the quirkiness of the IPO market, we'll take it.

With that said here's a look at some recent IPOs and where they stand now:

Bamboo.com and ImageX.com (Nasdaq: IMGX): In a column a few weeks ago we declared both of these companies shoddy investments. Bamboo got off to a nice start and is hovering around $22 from an offering price of $7. ImageX.com is nearing $18 after pricing at $7. Do these returns change anything? No. The companies are still weak, but will get a pop after the quiet period ends and the underwriters trot out their buy ratings. Check in after about two months.

LookSmart (Nasdaq: LOOK). Sure it's just another portal, but it has gobs of traffic. That makes it just another portal to be bought later. After shuffling the share amount, LookSmart did just fine on the public markets and now tops $37 a share from an offering price of $12. We underestimated the investor enthusiasm, but can live with LookSmart's success since revenue is relatively strong. It's also one of the few IPOs that has consistently gained following first day gains. The quiet period ends Tuesday.

Speaking of search/portal sites, Ask Jeeves (Nasdaq: ASKJ) is still full of question marks, but it hasn't hurt returns. After pricing at $14, Ask Jeeves (chart) is now trading at about $35. But if you bought at the top of Ask Jeeves' run you're probably asking the search service for your money back.

Red Hat (Nasdaq: REDH) still hasn't answered the long-term questions, but who cares because stock is rocking. You can decide if Red Hat is a trade or investment. Wink Communications (Nasdaq: WINK) is a leader in a young industry and has fared well (chart). We weren't cheerleaders, but we didn't pan those companies either.

And let's not forget those Internet music players. We liked MP3.com (Nasdaq: MPPP) just for the name, but if you bought at the high you're singing the blues (chart). We were also positive on Liquid Audio (Nasdaq: LQID) and it has fared about the same as MP3.com.

But the outlook for MP3.com and Liquid Audio was relative. Musicmaker.com (Nasdaq: HITS) could be among the shakiest companies ever to go public. We have to have at least one "I told you so." The company's sales were a joke when it launched an IPO and haven't improved. Shares of Musicmaker, trading at about $15, haven't strayed far from its opening price of $14.