We just published a research snapshot on OpenTable (OPEN – $28.75) which includes our typical intrinsic valuation analysis as well as a view of the company. Unfortunately for current investors the company is worth about 65% less than it’s currently trading at in the market.
This is explained in good part to the fact that you can’t short the stock and there are no options as yet since they just came public. But all this does is delay the inevitable decline to much lower prices before new long-term investors can buy shares.
We saw the same head-scratching results when Netsuite came public early in 2008. The shares amazed everyone by trading at $40 (our fairly in depth Netsuite pre-IPO report ($) suggested they were worth $12.)
Of course Mr. Market is not perfect but who is on the other side of this market buying the shares at these levels? Have they done any valuation work? Since there is no research available from the brokers yet are they hoping for the impossible which would be a “buy” recommendation at these prices?
The road ahead is fairly well known which is a few months of price declines as brokers come out with their “hold” or absurdly tenuous “buy” ratings, short-sellers are able to borrow shares and the huge piles of VC shares escape the lock-up and come into the market.
If you are or know of who buys stocks like this at these levels please send us an email or leave a comment. We have a bunch of other things that you or they might want to buy! 
Our full report was sent to Research 2.0 clients but is also available for purchase via the link below. At the same time our intrinsic value worksheet and a full company model built buy Virtua Research are available for purchase as well. The easiest thing to do is sign up as a client but we know that many prefer the a la carte solution that the store offers.
Full company model ($) with tabs for everything used in building a model.
[Disclosure: At the time of this writing Research 2.0 has no position in the shares of OpenTable.]
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“This is explained in good part to the fact that you can’t short the stock”-I just checked with two brokers (one retail, one prime broker) and both have shares available to short. You may want to rethink this part of your thesis.
Your brokers are better than mine! Of course in this case size does matter so knowing if they have 100 or 100,000 shares available makes a difference.
The real issue though is supply and demand. Right now supply is very limited and will remain so until the lockups come off. Then millions more shares are available for sale and help to establish a more robust market clearing price.
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