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21 May 2012

Will Facebook be the beginning of the technology IPO crash?

Tim Gibbon, director Elemental By Tim Gibbon

Even before the recent Facebook IPO (valued at £105bn), there has been much speculation surrounding the future of dot coms. Not surprisingly, past the Facebook mania the debate has also turned to whether technology IPOs would experience boom and bust again. Into its first days of trading and the hype left behind could Facebook be the technology IPO that sends the sector crashing?

 

Although there has been a number of IPOs this year, Facebook is the one that has peeked more interest above anything else. The infographic from Betterment entitled ‘The Facebook IPO bubble’ takes a look at the Facebook IPO in addition to some other recent ones.

 

The likes of Groupon, LinkedIn, Pandora and Zynga have been highlighted as some of the major recent IPOs, although there have been plenty of others that slipped under the radar such as Yelp, earlier this year. It’s worth noting that Groupon has been one of the worst performers so far this year as listed on the Nasdaq performance chart.


Image of Nasdaq peformance of IPOs 

 

A CNNMoney article reveals that out of 31 IPOs since the beginning of 2011, 22 are trading below their closing price from the day they initially went public. The article continues to reveal that 16 are trading below their offer price, so given this statistic; it doesn’t instil confidence in technology IPOs.

 

Image of CNNMoney technology IPO performance

 

The BBC has created a matrix of technology IPO organisations and what an investment of $100.00 would have returned. It’s interesting analysis that certainly paints a more positive picture of how IPOs have fared, perhaps bar Yahoo! a business that has a fate seemingly linked to its board antics more than anything else.

 

With a track record of technology companies not performing well, it could spell doom and gloom. However, for unimpressive returns with some, there are success stories - Amazon, eBay and Google that are examples of what can happen when things fare better. Whether Facebook can be another technology company that can buck the trend obviously remains to be seen – with many watching.

 

 

BBC technology IPO performers matrix (click on image to see the calculations)

Image of BBC technology IPO matrix table

 

Categories: Technology, Social media, News

Tags: Facebook IPO, Facebook, IPO, IPO bubble, digital bubble, Betterment, Facebook stock, Zynga, Pandora, Groupon, LinkedIn, technology IPOs, Facebook shares

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