As you have probably noticed, over the past year there has been a lot of news surrounding tech IPO’s. New companies like Pandora and LinkedIn have made HUGE splashes with their IPO’s in recent months. It seems like every month a hot new company goes public, but these IPO’s aren’t always pretty. Today I’m going to talk about some recent tech IPO’s, how they are doing now, and some future IPO’s that investors are about to bust a nut for.
The biggest tech IPO’s of the year include: Demand Media (online media/content farm company), Zipcar (membership-based car sharing company), Renren (China’s largest social networking site), LinkedIn, Yandex (Russia’s largest search engine site), Bankrate (personal finance company), Pandora Media (online radio), Zillow (online real estate database), Skullcandy (headphones), and yesterday, Groupon.
Groupon has been trying to go public for a few months now, and ended up being the biggest tech IPO since Google went public in 2004. Groupon offered 35 million shares total at $20 each, and as of this morning the company is worth almost $13 billion with shares sitting at $26.11. The IPO was a huge success for the company, even though there is a lot of skepticism about its future. One thing is for sure though, the IPO made a lot of investors happy. Like many IPOs, there were a lot of people who became millionaires and even billionaires overnight just because of the IPO.
For Groupon’s IPO, check out this Business Insider list of lucky people that made a lot of money as shareholders. The biggest winners include Starbucks’ Howard Schultz who got $50 million, Marc Andreessen and Ben Horowitz’s venture capital firm got $92.2 million, and Groupon CEO Andrew Mason’s stake is now worth a whopping $1.2 billion.
Even though most of the recent tech IPO’s have initially been successful, a majority have gone downhill since. Demand Media went public in January with a debut price that was 33% higher then the share price of $17, valuing the company at more than $1 billion. Today however, the shares sit at just $7.47. Renren, basically the Facebook of China, was said to have a spectacular IPO in May with shares surging 28.6% above its $14 IPO price. Today Renren share’s are down to a dismal $5.74.
There are some companies who have kept their value, though. Since LinkedIn’s huge IPO in May, where shares closed 109% above IPO price, they now sit at $81, just below the IPO price of $83. Today Pandora is also doing all right, with shares just a few cents below the IPO price of $16. Real estate database company Zillow is still doing really well, with shares staying almost $10 above the IPO price of $20, but still way under the debut price of $57.
The chart below shows 25 recent hyped up IPO’s and how they’re fairing. “Pop” refers tothe jump from the offering IPO price to the debut price. (Bloomberg Businessweek)
Overall, it’s not very pretty after the initial offering. In terms of the average of the 25 above companies, shares have slipped 31% from their opening price.
The successes of some of these companies in the beginning of the year triggered an IPO race with many tech companies, but since seeing disappointments such as Renren’s, a lot of companies have backed off or are waiting until later for an IPO. Of these companies, the most notable is of course Facebook, which plans to go public next year sometime. Also there’s Zynga, the Facebook game company that could have an IPO this year, Living Social, Groupon’s biggest competitor, next year probably, and Twitter, which will probably wait until 2013.
It has definitely been an exciting year for tech IPO’s, I think it’s amazing how a company like Groupon or LinkedIn can be worth BILLIONS in such a short period of time. This is the land of opportunity, and there’s money to be made out there, but just because a company debuts way above the IPO price doesn’t mean it will stay there. We’ll see how long Groupon CEO Andrew Mason stays a billionaire. My guess? Not very long…
Feel free to leave any questions or comments below!