Grape Gluts, Shortages & Facebook’s IPO

Almost exactly 13 years ago, I sat on the edge of my seat, giddy on hope and thankful for shares in a high-profile Internet stock about to go public.

The date was May 11, 1999 and the insider stock I had was in TheStreet.Com. I acquired the shares after moving over to TSC from MarketWatch at the behest of my colleague Herb Goldberg.

I remember being at a staff meeting of TSC staff in New York and watching Jim Cramer’s and his usual thermonuclear energy.

“This Internet thing. It’s the real deal, isn’t it?” For emphasis Cramer poked at me with an index finger.

TheStreet.com priced its IPO at $19 on May 10, 1999. NASDAQ trading began May 11 and hit $80 in relatively short order that day.

Real enough, but not sufficient to keep me from flipping most of my shares at $72 on the first day. I kept 100 shares as a bet on the horse. I eventually sold those several years later for less than $1 per share.

Least you think I’m a genius, I did the same thing with a substantial block of Cisco stock back in 1994. I acquired the stock when Cisco bought Kalpana, an EtherSwitch company that I had been involved in at a very early stage.

I would be several million dollars ahead of the game today if I’d just hung on to the Cisco shares rather than using the proceeds to fund Wine Business Monthly and associated online operations..

But, back then that my thought process was shaped by what I WANTED to do rather than what the underlying fundamentals were of the Cisco stock and the future. The prospects of launching a new magazine trumped my judgment on the most prudent thing to do with Cisco.

FACEBOOK, WINE & BUBBLES THAT ARE NOT CHAMPAGNE.

Clearly we have no idea where Facebook is going. It has an advertising-supported profit model. So did TheStreet.Com. GM pulled out of Facebook this week because it didn’t sell cars.

And this older Vin65 blog post IPO Rerun Special: Do people actually buy wine on Facebook? raises much the same question.

Is Facebook a bubble … or too much on the bleeding edge like TheStreet.Com?

TSC had a brilliant staff and a vision that was a little too far ahead of the curve. After hitting the wall, TSC reorganized, made a tough recovery, found a profit model and now produces a fantastic product.

Will FB follow that path, or avoid stepping off the cliff? I have no idea. But, then, I’m not buying FB stock today. I’m not going short either. This is craps and I like my changes at the blackjack table a lot better.

WINE GLUTS & SHORTAGES: BEWARE OF WISHES & BAD ADVICE

The current mania about potential grape shortages sound an awful lot like the 1990s pump-and-dump hype from brokerage analysts and investors eager to profit from the raft of hasty and badly constructed winery public offerings. Most of those public entities are long gone now. Most prominent of those defunct winery stocks were Mondavi (MOND), Beringer (BERW) who make wine as part of other companies.

Those behind public winery offerings made money. The retail investor? Not so much.

Looking at facts and fundamentals can save you from the hype.

Among the more rational and cautious voices dealing with the possibility of a grape shortage are some looking at the global market, global production figures and consumptions numbers:

• Shortage? Or Not? Are Growers About To Over-Plant Again?

• California Grape Shortage: Fact or Fiction?

Like the fate of the Facebook IPO, we don’t know where the grape market is headed because the California wine industry operates on pretty poor advice and a lack of full, complete and unbiased facts. That’s what cause the winery IPO disasters.

That was also behind the massive wine glut of 2001.

I predicted that glut in 1996 based on planting, production and consumption data. The vitriol and grief heaped on me was intense, personal, and vindictive. After the sale of Wine Business, I wrote a book on the coming glut (The Wrath of Grapes) and Barron’s Weekly used it as the core of a major feature article.

The big wine industry powers denounced me, Barron’s and everything we wrote.

“There is no glut. There will be no glut!” That was the industry line.

And the glut came.

Some of the same glut-deniers are among today’s loudest PLANT! PLANT PLANT! promoters

Will they be right this time?

Like the direction of the Facebook IPO, that’s really hard to tell. But I don’t trust them at their word because their word was not good last time.

That really means that you’re on your own.

You need to search for the data yourself and not depend on “experts” and “leading figures” who have profited from avoidably bad advice in the past.