Pass on the Transmeta Froth
Good technology and good investment ideas are not always one and the same.
In one of the more hyped initial public offerings of 2000, Transmeta (TMTA) made its Nasdaq debut Tuesday with a bang. The maker of chips for mobile devices saw its stock more than double in its first day of trading, from an offering price of $21 per share to a closing price of more than $45.
What It Means for Investors
Good technology does not necessarily make an attractive investment idea. Highly publicized IPOs like Transmeta tend to rise sharply in the days and weeks following their offering, only to sputter to a much more reasonable valuation soon after. In Transmeta's case, investors are paying a very high price for a firm with minimal product revenue. We see this as a big risk for a company so speculative in nature.