Castlight Health (NYSE:CSLT), a company that offers health information online to help inform medical choices and reduce insurance costs, had its IPO today, and saw shares promptly skyrocket. Shares were initially priced at $16 per share, and were nearly at $40 per share by market close, giving the tiny company that brings in $13 million in revenue per year a market cap of $3 billion. Is this one clear sign that the IPO market has shot dangerously far off into bubble territory?
In this segment of Friday's Investor Beat, host Chris Hill and Motley Fool analyst Ron Gross take a look at this staggering IPO. Ron notes that this is the ninth IPO to double on its first day of trading during the past nine months, which he sees as bubble territory. He also says that this worrying situation can leave investors jumping into stocks with sky-high valuations, buying the momentum, but ultimately setting themselves up for a fall, because they bought in at the wrong prices.