Facebook, Groupon, and Zynga Under-perform after IPO
It seems like yesterday that the media was buzzing about Facebook’s impending IPO. Analysts were prepping for the market boost that was sure to follow the social network’s grand entrance into the public arena. Now, just one month after Facebook’s turbulent—maybe even disappointing—IPO, analysts are commenting on how online companies, like Facebook, Groupon, and Zynga, have all performed poorly upon going public, and how this trend may hinder the future IPOs of other tech firms.
As trend-setters, first-movers, and innovators in a fluid arena, the future performance of online companies is often very difficult to predict. Many investors are now concerned that analysts will overstate the value and revenue producing abilities of future online companies that are gearing up for their IPOs. Naturally, this fear has eliminated some of the drive investors once had to grab their share of each new online company the moment it went public.
In consideration of the market’s current climate, Kayak, a major online discount travel agency, has decided to delay its IPO. The company has not yet announced even a tentative date for when it will reschedule the offering. In all likelihood, it depends on how quickly market sentiment towards online companies brightens.
Online discount company Groupon, recently proved itself a perfect example of what an online company should not do when going through an IPO. Many of the firm’s top executives and initial shareholders cashed out their shares in the company. This move captured much of the capital which would have otherwise been available to the firm for reinvestment in new projects. To investors, this conveyed a lack of faith in Groupon’s future. How can a company hope to bring in new investors when its own management team is conveying its shares are not a lucrative investment?
While some online companies have performed poorly after hyped IPOs, thankfully this is not the fate of all tech companies. Local Boston firms Brightcove and Demandware are both enjoying strong performance following their public debuts. Moreover, investors are still cautiously drooling over the dozens of promising tech prospects that are waiting in the wings for their time to shine in the public market’s limelight. We just have to wait out the intermission and give Facebook, Groupon, and Zynga time to get off the stage first.
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