Public Internet companies and momentum

The last year and a half, a bunch of Internet companies have gone public. From LinkedIn to Zynga to Facebook. The individual companies have performed very differently, both operationally and as stocks. With LinkedIn and Zynga being two of the extremes.

One observation is the importance of the interplay of operational and financial performance. If the financial performance doesn't live up to estimates, Wall Street takes out the sledgehammer and crashes a lofty valuation, which results in options being worth less. And often that ignites increased turnover of key staff. Leading to operational issues and worsened financial performance. Etcetera. Once that has happened, any momentum is strictly negative.

Great companies almost always go public, but a younger version of the great company need to prepare rigorously before subjecting itself to its valuation being updated every minute.