Dear Mr. Berko: My stockbroker had me buy 200 shares of FireEye at $63 in April 2014. We sold it for a 20-point loss the following month. In August 2015, on his recommendation, I bought 300 shares of it at $44. We sold those shares in October at $33. FireEye now trades at $17. At this price, do you think the third time could be the charm? I’ll buy 800 shares if you think so.
— M.L., Rochester, Minn.
Dear M.L.: Two years ago when our family doctor asked whether I’d heard of FireEye, I thought he was referring to an ophthalmological disease. He quickly disabused me of that notion. He said FireEye (FEYE-$17) is in the cybersecurity business and designs slick algorithms and programs that detect, analyze and resolve cyberattacks.
FEYE came public at $20 in the summer of 2013, with revenues of $162 million and losses of $170 million. It immediately began trading in the low $40s, giving it a market capitalization of $6 billion and proving that it’s impossible to overestimate the cupidity and stupidity of American investors.
The following year, FEYE put $435 million in revenues on the books and reported losses of $470 million, while management burned through its IPO cash hoard. In May 2014, with generous fluff and hype, a secondary offering of 5.6 million shares at $82 raised $460 million. Ten days later, CEO Ashar Aziz, Silicon Valley’s newest billionaire, sold 1.1 million shares at $82, pocketing nearly $100 million. And a week later, with high-sounding expectations, management raised an additional $600 million with a convertible bond offering. Investors were in awe of FEYE’s market success. FEYE had no earnings and no earnings in sight, yet it had a breathtaking market cap of more than $12 billion. Panic-stricken investors were frantically buying the stock, fearing that they might otherwise miss another Google or Facebook. Two weeks later, everything collapsed, and FEYE was trading in the mid-$40s.
