‘Most Disappointing’ IPOs: Where are they Now?
Over the years, the IPO market has seen both losers and gainers. Some companies go forward from successful IPOs to increase firm operations and get higher returns. Other businesses, however, end up failing after their offerings as a result of overpricing shares, wrong management decisions as well as failure to handle financial crises and lawsuits effectively. However, some have pushed past their sudden drop in stocks later on to become global leaders in their field. Facebook, for example, had its stock drop by over 50 percent in the year following its issuance. However, it later turned profitable and is currently the world’s largest social media platform. Its stock is now trading at close to four times its issuance price. Below, we discuss some IPOs that were highly publicized but whose companies dropped soon after.
- Groupon Inc.
The company started as an e-commerce platform that connected people in 28 countries. Through Groupon services, subscribers could source products from locals in other nations. Further, the firm offered its clients access to travel packages through online agreements. It went public in 2011 in an affair that was considered one of the most overhyped offerings of the year. During its issuance, it sold shares at the price of $20 each and generated revenue totaling to $700 million.
Problems, however, began when investors found out that the firm’s CEO and other shareholders earlier on had sold all their shares during the offering. Further, the SEC challenged the company’s reports on revenue and their accounting methods, resulting in the firm having to change its book-keeping techniques. Soon after these episodes, the stock took a nosedive in the markets. Currently, the firm is not as widely used and its growth potential reduced to nil. The firm has its stock being traded around the price of $3.00 all through April this year, $17 below the issuance price.
- Zynga Inc.
This firm began as an online game producer, mainly targeting Facebook users since its software was accessible through Facebook’s platform. Some of its games such as Farmville and Words With Friends took the internet by storm. As a result of the great success this venture had, the company decided to go public. Its offering was one of the largest since Google’s back in 2004. It sold its stock at $10 per share.
However, markets did not move as Zynga hoped. The company failed to diversify its services and soon got phased out with a lower number of people playing its games. Most users preferred to download their products from their respective operating systems’ online stores. Apparently, Zynga did not notice this or failed to make a move to adjust themselves with the trend. Further, many Facebook users marked its games as spam, leading to increased unpopularity. As such, investors realized that the firm had very low growth potential and sold their positions on the stock. Demand continuously decreased from 2012, at first by a few cents and then by the dollar. Currently, Zynga is trading at $2.80 a share. This figure is $7.20 below its issuance price resulting in a 72 percent overall decline.