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.