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December 19, 2011 11:19 pm GMT
Why are tech IPOs such a big disappointment this year? The latest IPO, Zynga, is trading down from its Friday debut (currently around $9 versus its first IPO trade at $11). It's not just Zynga or the overall market (which is also down). Just look at almost any tech IPO this year, many are below where they first traded on the day their shares went public, including LinkedIn (now trading at $65 vs. opening at $83 on its IPO), Groupon (now at $22 vs. $28), Pandora (now at $20 vs. $10).Part of the reason for the lackluster post-IPO performance is that the entire stock market has gone nowhere this year. But there is something more going on here with tech IPOs in particular. They are suffering from the fact that, for a variety of reasons, they were all delayed IPOs. While delaying these IPOs may be good for the companies, it is not great for public investors because by the time they get their hands on any shares, most of the value will already be baked into their price. If you simply compare the pre-IPO valuations of the current crop of Internet companies to earlier tech darlings like Amazon or even Google, it's clear that most of the value is being captured by the private investors, not the public ones. Back in the day, public investors were able to capture 99 percent of the "terminal value" of companies like Amazon, Cisco, or Microsoft.
Original Link: http://feedproxy.google.com/~r/Techcrunch/~3/6j7DO45S0cA/
Tech IPOs Just Aint What They Used To Be
Why are tech IPOs such a big disappointment this year? The latest IPO, Zynga, is trading down from its Friday debut (currently around $9 versus its first IPO trade at $11). It's not just Zynga or the overall market (which is also down). Just look at almost any tech IPO this year, many are below where they first traded on the day their shares went public, including LinkedIn (now trading at $65 vs. opening at $83 on its IPO), Groupon (now at $22 vs. $28), Pandora (now at $20 vs. $10).Part of the reason for the lackluster post-IPO performance is that the entire stock market has gone nowhere this year. But there is something more going on here with tech IPOs in particular. They are suffering from the fact that, for a variety of reasons, they were all delayed IPOs. While delaying these IPOs may be good for the companies, it is not great for public investors because by the time they get their hands on any shares, most of the value will already be baked into their price. If you simply compare the pre-IPO valuations of the current crop of Internet companies to earlier tech darlings like Amazon or even Google, it's clear that most of the value is being captured by the private investors, not the public ones. Back in the day, public investors were able to capture 99 percent of the "terminal value" of companies like Amazon, Cisco, or Microsoft.Original Link: http://feedproxy.google.com/~r/Techcrunch/~3/6j7DO45S0cA/
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