Cracking open the Newegg IPO filing

The wonderful folks over at Consumerist pointed out yesterday that online retailer Newegg has filed for their IPO — or Initial Public Offering to us non-Wall Street types. For those not in the know, Newegg sells software and electronics like laptops, digital cameras, TVs, and so on, for mega-cheap.

As Consumerist writer Ben Popken went on to say, Newegg is following in the footsteps of both Zappos and Mint.com, which were both bought in the past few months by much larger public companies that occupy similar market niches (Amazon for Zappos and Intuit for Mint.com). But that means Newegg is a little different than the others, just for the sheer fact that a famously customer-oriented retailer isn’t going to be under the leadership of another company.

Instead, Newegg will be directly held responsible by a group of shareholders. I will admit that many people have done a better job of explaining some of the issues surrounding IPOs and investing in startups (see this page in Neal Stephenson’s Cryptonomicon for a great example), but I’m a very visual learner, so I made some charts.

As you can see, Mint.com has to work with many more new elements than Newegg does, which could be a very good thing for Newegg and its founder, Fred Chang. The company will continue do its thing as long as it’s profitable enough to keep the shareholders happy, which shouldn’t be a problem if they keep their customers happy — and thus, coming back.

This is of course an immensely simplified version of reality: both Mint.com and Newegg had “shareholders” before they became publically traded companies. These shareholders, however, were the groups and companies that gave the startup some venture capital to get off the ground, not individuals investing for their portfolios.

Think of it like this: for a couple of years, your parents buy you art supplies and you draw them pictures that they think are amazing (or at least they tell you your pictures are amazing). Your parents frame them and give them to family members and close friends.

Then, after a while, you and your parents go out and decide that you could make even more amazing art if you had more money to buy supplies. So you go to the SEC (Security and Exchange Commission) and ask to file for an IPO. Then you get even more money than you’ve ever had before, and the chance to make even more art.

But you’re not just responsible to your parents any more — now you have complete strangers who can call you up and tell you that they’re not happy with your profits lately, or that you’re using too much blue in your paintings. It’s a scary proposition, isn’t it?

But it can be even scarier for an investor. Would you want a company that you own stock in to risk your funds by buying out a competitor or parallel niche company to expand their horizons? Would you risk your hard-earned cash, or maybe even your retirement, on an IPO that could make you a lot of money?* Or would you rather go with something a little more reliable and known?

For a little more in-depth look at IPOs, check out this great article by Lise Buyer

*for example, if you bought Google at their IPO price of $85 in 2004, you’d have a profit of over $410 per share if you sold today.

Molly Masters the Stock Market

By Molly Helgren*, WeSeed

I don’t have as much activity this week due to the fact that few things seem to be doing well. The most disappointing company in my portfolio this week was RIMM. I bought RIMM a few weeks ago when my Portfolio was just getting started because I love their products and couldn’t live without my Blackberry.

After their disappointing earnings announcement, though, I’ve lost well over $500 in 24 hours from that position alone. But I’m holding onto it for now with the hopes that it will make a comeback after the initial buzz over their earnings dies out.

Here are my trades for this week:

Sold 100 shares of Amazon @ 90.28 – Amazon had a great week last week, and made about $1,200. The big jump seemed to not be very characteristic, so I took advantage of the large gain and got out. I still love this company, and will probably trade them again in the future as their goal is to become the biggest online marketplace out there.

Sold 200 shares of GM @ .76 – Was up a penny from when I bought it! I gave it a week and it barely moved, so with everything going on with GM right now I figured it wasn’t worth the risk and I’d take my $2 in earnings.

Bought 100 shares of Google @ 500.83 – As soon as it hit the $500 mark, I figured it was time to jump on the bandwagon with the hopes that someday it’ll reach back up to its $700 price per share before the recession was in full swing. I also love the company – I use Gmail for my personal emails, and always use google for searches, maps, weather, etc. on my Blackberry.

Bought 100 shares of Kraft @ 26.51 – There has been little support for Kraft’s attempted acquisition of Cadbury over the past few weeks. My hope is that this has driven the price down so that now is the time to buy before a deal is reached and it’s back on the rise.

Sold 100 shares of Wal-Mart @ 50.96 – I bought WalMart over the summer with the hopes that back to school season would raise the price. But so far it has been one of the poorest performers in my portfolio, so I just wanted to get rid of it. I lost about $900, but at one point I had been down almost $1,500 so I am glad I waited it out a little longer.

Bought 100 shares of Nintendo @ 33.25 – They announced this week that they will be lowering the cost of the Nintendo Wii from $249 to $199. Just in time for the holiday season! I now own 200 shares of Nintendo.

Bought 50 shares of Visa @ 71.00 – I’ve only owned Visa credit and debit cards. They were also in the headlines this week for announcing a financial education plan for consumers.

Bought 100 shares of Microsoft @ 25.71 – I’ve noticed a significant increase in Microsoft advertising recently with the upcoming release of Windows 7. I’m hoping that if the launch goes well, the shares I buy now will be much more valuable come October.

Bought 100 shares of Ralph Lauren @ 72.87 – They make a wide range of quality products from clothing to linens. I’ve had them in my Portfolio for a few months now and they have been one of my top performers, making me over $2,500 so far. Since I’ve been so pleased with their performance, I wanted to risk a little more to see if they would continue to pay off. I now own 200 shares.

Bought 100 shares of TiVo @ 10.20 – How else would I have been able to watch the season premiere of Grey’s Anatomy last night when I got home late? I love their product. Mine is set to record at least two shows every night. I get watch TV now that I never would have prioritized into my routine without TiVo.

My Portfolio is still doing well with an overall gain of $13,466.63. I currently own 6650 WeShares and hold $291,887.63 in stock positions.

This week I lost about $5,000, but I don’t feel discouraged because percentage-wise, the market as a whole was down as well. My goal for the weeks to come is to not only make as much money as I should proportionally to the market as a whole, but to be making decisions that help me beat the odds.

Gain/Loss For Today:

-1,587.72

Current Portfolio Value:

1,013,421.78

WeShares Currently Own:

6650

Overall Gain/Loss:

13,422.03

Overall Trades:

85

WeSeed Cash Available:

721,586.50

*Molly Helgren is an executive assistant at PEAK6, WeSeed’s parent company. Molly is putting together a WeSeed Portfolio based solely on the companies that she knows and likes. So far, she’s doing pretty well.

Google and Microsoft Invade Each Other’s Wheelhouse

by Carlos Portocarrero, WeSeed Writer

Google (GOOG) is coming after Microsoft (MSFT), and they’re not being shy about it. Next year, Google is going to launch an operating system based on Chrome, their brand-spanking new web browser.

Google claims Chrome OS will start up in less time, and take up fewer resources, than anything else on the market. Translated: Google has got Microsoft Windows in their sights and they’re about to pull the trigger.

For its part, Microsoft isn’t just sitting around. Earlier this year, the massive company launched Bing, their new search engine. Google’s search had been the 900-pound gorilla in the search world and crushed its competition (remember Altavista? Ask Jeeves?), but a recent New York Times article suggests Microsoft’s new Bing has some skills of its own.

This means both companies are going after the other’s jugular: Windows is Microsoft’s cash cow, and search is where Google makes its green.

At first glance, a new operating system that claims to be faster and better than Windows could be all hype. But if you attach Google’s name to it, it becomes a pretty big deal. Besides, we’ve already seen what Google can do—their Chrome browser is noticeably faster (at least for this Google user) and less taxing on a computer’s resources than Internet Explorer or even Firefox.

That’s why I installed Chrome on my new Netbook—it runs a lot smoother than the other browsers out there. Google claims Chrome OS, which is based on the Chrome browser, will practically turn your OS into an Internet browser that runs your computer.

This is all part of Google’s overarching plan: their other applications (Gmail, Google Docs, etc.) are all meant to run in “the cloud”—which means they run off the web and not off your machine. Google is also going to give the new OS away for free—all they want is for more people to see the search ads they service.

Google fanboys—and there are many of them—shouldn’t get too carried away, though. This is still Microsoft we’re talking about. They’ve overcome countless accusations of doing shady stuff in the PC industry, and they’re still making huge bucks.

But all told, this is pretty fun to watch. If Bing was Microsoft’s uppercut at Google, then Chrome OS is a haymaker aimed straight at Bill Gates’s jaw. Can he bob and weave away from it, or will it be a knockout blow?