High-profile initial public stock offerings (IPOs) in the first half of 2011 revealed the market's hunger for tech startups, while also reviving Debate 2.0 about whether we were heading toward a tech boom or bubble.
But instead, we got a fizzle. That is, most of the IPO superstar startups from earlier this year are now underwater. According to Thomson Reuters data, 66 of the 97 companies that have gone public in 2011 on a U.S. exchange -- or 68 percent -- are now trading below their IPO price.
Following an up-tick in early 2011, overall IPO proceeds decreased from $12.3 billion in the second quarter to $3.1 billion in the third quarter, PricewaterhouseCoopers reports. Third-quarter IPO proceeds marked a 35 percent decline from the third quarter of 2010. And data from the National Venture Capital Association and Thomson Reuters showed that just five venture-capital backed companies held IPOs last quarter -- the worst showing since late 2009.
Although some companies, such as Zillow and LinkedIn, have managed to keep their stock above its offer price, the specter of nosedives is causing even the most popular Internet companies to shy away from IPO plans.
Both Groupon and Zynga postponed their IPOs just a few months after filing in June. Groupon says its offering is back on track, but it's unclear on the timing and speculators say it could be worth less than $5 billion by the time it goes to market, which is significantly lower than the $25 billion estimates earlier in the year, not to mention Google's $6 billion acquisition offer last year. And Facebook, which is expected to have one of the biggest IPOs in history, reportedly plans to go public at the end of 2012, a later public debut than it initially planned.
Just how bad is the IPO environment? Stephen Paternot, whose company, theglobe.com, posted the biggest one-day price jump in history on its IPO day in 1998, only to de-list its stock from the Nasdaq less than two years later, told CNNMoney that current conditions suggest "the end of the Wall Street IPO as we know it."
But IPOs dreams are hard to kill: Dealogic reports that the 130 companies currently waiting to go public is a larger number at this point in the year than it has been in any year since 2007. It still remains to be seen whether or not these companies will actually take the plunge into today's rocky stock markets, much less match the 154 IPOs the market saw in 2010.
Ubiquiti Networks may be the first to test the waters in the fourth quarter, ending the two-month IPO drought as early as this week. What can Ubiquiti and other tech companies learn from their IPO predecessors? Here's a look at just how underwater some high-profile tech IPOs of 2011 were on Oct. 10.
Co-Founder, Chairman and CEO: Richard Rosenblatt IPO Date: Jan. 25, 2011 Debut Price Per Share: $17 Current Price Per Share: $8 Update: Leading off the IPO race in 2011, raising $151 million by sharing 9 million shares, Demand Media has come under fire for everything from its accounting practices to its approach to creating content. "While we are pleased with the outcome [of the IPO], I definitely don't look at the decision to go public as something that other tech companies should just, as you say, "suck it up and go for it," Rosenblatt told Business Insider. "I would only suggest a public offering IF a company has achieved scale and it feels comfortable forecasting its performance on a quarterly basis." Demand Media announced it would buy back $25 million of its shares effective Aug. 19.
President And CEO: Rose Crane IPO Date: Feb. 2, 2011 Debut Price Per Share: $16, rising to $26 by early afternoon Current Price Per Share: $8.30 Update: After selling 5.4 million shares and raising more than $86 million, Epocrates has seen its price per share cut almost in half. Erick Tseng, head of mobile products for Facebook, joined Epocrates' board of directors in late August. Epocrates is also in the early stages of launching new services, including SmartSite and Epocrates App Network.
Chair and CEO: Scott Griffith IPO Date: April 14, 2011 Debut Price Per Share: $18, jumping 66 percent on its first day of trading Current Price Per Share: $17.12 Update: Zipcar sold 9.68 million shares at its Nasdaq debut, raising $174 million -- its market value at IPO was $1.2 billion. The company has increased its North American membership to more than 515,000, from 210,000 in 2008. While it has mostly managed to keep its head above water and is generally considered a bright spot among 2011 IPOs, its stock price has bobbled between a 52-week low of $16.50 and 52-week high of $31.50.
Founder, CEO: Joseph Chen IPO Date: May 4, 2011 Debut Price Per Share: $14, rising as high as $21.93 before closing at $18.01 Current Price Per Share: $5.46 Update: Commonly referred to as the "Facebook of China," Renren started its life as a publicly traded company fairly successfully, with stock prices soaring up 40 percent early in the day. It ended up selling 53.1 million shares, raising $743.4 million for a market valuation of $7.4 billion. Since then, however, the stock price has gone deep underwater. More than 117 million people have Renren accounts, with about 31 million unique monthly logins. While Renren was part of a wave of Chinese company IPOs in 2011, some problems in the market have emerged. Since March, auditors of 30 U.S.-listed Chinese firms have resigned and 20 have been delisted, as regulators continue to investigate accounting and disclosure issues.
Co-Founder/CEO: Arkady Volozh IPO Date: May 23, 2011 Debut Price Per Share: $25, rising to $38.84 by 4 p.m. Current Price Per Share: $21.02 Update: Russia's most popular Internet search engine saw stocks jump 55 percent in its first day on NASDAQ and sold 52.2 million shares for a market value of $8 billion. After keeping its head above water for a while, prices are slipping. However, the "Google of Russia" has potential: It may actually rival Google for market domination, boasting 60 percent market share, compared to Google's 22 to 30 percent. "We still have huge room to grow," Volozh told Bloomberg's "In Business with Margaret Brennan." "The Russian advertising market is projected to triple in the next several years, and we also have nearby markets." In August, Yandex acquired startup The Tweeted Times and recently expanded its search site into Turkey.
Founder/CEO: Joe Kennedy IPO Date: June 14, 2011 Debut Price Per Share: $16 Current Price Per Share: $13.37 Update: After selling 14.7 million shares to raise $234.9 million, with a market value of $2.4-$2.8 million, Pandora took a quick slide. Its shares hit a post-IPO low on Sept. 12, at $9.33 per share, as investors expressed concern about increasing competition from players such as iHeartRadio from Clear Channel Radio service. Pandora may be poised for a rebound, though: In its fiscal second quarter, the company increased revenues 115 percent to $67 million.
Founder: Gary Wang IPO Date: Aug. 16, 2011 Debut Price Per Share: $29 Current Price Per Share: $14.20 Update: Raising $174 million at IPO, China's first user-generated content (UGC) site and number-two online video site boasts over 90 million registered users and more than 200 million monthly unique visitors. Still, some analysts pointed to the unpopularity of UGC among Chinese consumers, who tend to prefer professionally produced video, as a weak spot for future growth. In China's online video advertising market, Tudou's share fell from 17 percent to 14 percent since last year, while its rivals Youku increased 2 percent to a 23 percent market share and Sohu's share grew from a 7.9 percent to a 13 percent share. Analysts wondered whether Tudou would eventually be acquired by a big player, such as Youku or Baidu. Since Tudou's August IPO, the window of IPOs in 2011 has remained closed, while companies wait out the volatile market and position themselves for better long-term, post-IPO prospects than most of their 2011 predecessors.