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Are Medibank Private Ltd shares set to crash today?

Some shareholders in Medibank Private Ltd (ASX: MPL) have been waiting anxiously to sell their holdings, angered that they were unable to do so from the commencement of trading last week.

With shares in the insurer up 7% to $2.15 from the retail offer price of $2 and a lot of negativity surrounding the company’s apparent overvaluation, the temptation to take a profit must be strong.

Considering all the negativity echoing throughout the headlines in the past week – one commentator even went so far as to say he had zero sympathy for Medibank IPO participants – I wouldn’t be surprised to see the desire to sell build up to fever pitch.

After all, a 7% profit on an investment of $5,000 works out to $350, somewhere around one third of a week’s wage for the average Australian – good money for very little work, although probably a poor reward after all the stress and portfolio-watching stag profit takers have been suffering.

Furthermore, the risk of massive selling impacting the share price is likely to continue past today, as some individuals using platforms like NABtrade may be unable to trade their shares electronically until tomorrow.

If you can’t sell at a profit or watch your share price fall below what you paid for it, don’t panic:

It’s better to think of investing as less like a race, and more like building a house. If rushed, you won’t be as satisfied with the result, but take the time to think, educate yourself, and develop a plan, and you could create something truly beautiful.

So to the stag profit takers, well done on your easy money, but remember that only a small percentage of IPOs actually skyrocket, and consider using your profits to buy a long-term company like The Motley Fool’s Top Stock for 2015.

With strong competitive advantages, a majority market share and enterprising plans for overseas expansion, it looks like a real long term winner and could be a solid replacement for Medibank in your portfolio.

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Motley Fool contributor Sean O'Neill doesn't own shares in any company mentioned.

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