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Comment by encoderer | Hacker News Reader

You have to take it in context of relative volatility. There are products where a 12% move wouldn't be notable. In this case, it's under a week old. This expected volatility is why market makers do not sell options on ipo issues for a little while.

These kinds of stories are like basing a climate change story on unseasonably warm weather.

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In other words, people are using the market to determine the valuation rather than using the valuation to determine the market.

that's how it goes for companies without real profit.

At least until after a few 10ks

This is how the market works. It's crowd sourcing valuations. It's not a bad thing. Do you have a better way to determine the valuation of a complex business?

Sample over a wider time-window (a quarter, at least, seems reasonable; a year if you really want a sense of the business's pulse).

Motion in the stock right now is noise; possibly profitable noise for some people, but there's very little to draw conclusions from in these post-IPO fluctuations.

The purpose of the market is not to determine valuations, it is to facilitate transactions. The transactions happen at different prices (very close together) - the idea is the market participants (buyers and sellers) have their own ideas about valuation and enter transactions accordingly. All else is speculation.

> the purpose of the market is not to determine valuations

Promoting price discovery [1] is one of the fundamental features and functions of a market.

Side note: the line between "speculation" and "investing," where the former refers to short-term shareholding and the latter to a specific set of Graham-Dodd valuation models, is not a general economic term. It only makes sense when discussing Graham-Dodd investment styles, which are a subset of long-term financial investment styles, which are themselves a subset of the market.

[1] https://en.m.wikipedia.org/wiki/Price_discovery

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