Ideally, an initial public offering marks the beginning of expanding earnings for a company. It’s often referred to as “The Exit,” separating start-ups from a mature company. But not every story has a happy ending, or at least not yet.
The Good – those companies whose shares traded strongly on the first day of the IPO and have continued to offer positive returns for investors
The Bad – the worst performing IPOs on first day of trading on the public markets
The Ugly – those companies that gave shareholders high hopes, but continue to under-perform post-IPO
Cue the music from Ennio Morricone.
Total raised: $16 billion, highest IPO in the tech sector
Offer date: 18 May, 2012
Offer Price: $38
Industry: Social media
The story: This will be remembered as the day that social media grew up. Facebook ended its first day of trading as the 3rd largest IPO in US history. Despite 40 lawsuits filed in the following days, valuation soared up to $105 billion. Two years later, the stock has nearly doubled its offer price.
Total raised: $18.1 billion, second highest IPO in the US
Offer date: 17 November, 2010
Offer Price: $33
The story: Should you buy stock in a company that declared bankruptcy a year earlier? Yes, if the company is GM. The federal government loaned the company $50 billion in the middle of the recession. Investors piled on, putting them back in motion.
Total raised: $22.1 billion, world’s largest IPO
Offer date: 6 July, 2010
Offer Price: HK$2.88-HK$3.48
The story: This is it – the biggest IPO in the world. A little bank for rural farmers grew into a behemoth worth almost $130 billion. The Top 10 IPOs contain several other Chinese banks as well, indicating how important this region has become to the global economy. Although the share price barely moved for the first week as it traded in Hong Kong and Shanghai, more shares had to be offered to keep up with demand.
Initially raised: $62 million
Offer date: 7 October, 2009
Offer Price: $10
Loss in value: 36% in two weeks
The story: A biotech firm with a cure for joint pain sounds like a winner. However, poor timing during healthcare debates and mistakes made with record-keeping drove investors away.
Initially raised: $500 million
Offer date: 26 March, 2014
Offer Price: $22.50
Loss in value: 15.6% first day
The story: The maker of Candy Crush couldn’t get investors addicted to their stock. The problem was that only one game was responsible for 78% of revenues. People were cautious due the performance of Zynga (see below)
Initially raised: $1.04 billion
Offer date: 25 September, 2009
Offer Price: $12.50
Loss in value: 14% in first day
The story: A case of one of the best IPOs that turned into one of the worst by bad decisions. The Chinese gaming company, famous for Legend of Mir, pushed too hard and introduced too many shares, collapsing the buying frenzy and driving the stock into a tailspin.
Initially raised: $1 billion
Offer date: 16 December, 2011
Offer Price: $10
Loss in value: 80%, $10 billion over a year
The story: After a great opening, the Facebook-dependent maker of Farmville and similar social games stopped performing the following year. Games tanked and revenue dropped as users moved on.
Initially raised: $700 million
Offer date: 4 November, 2011
IPO deal size: $510 million
Offer Price: $20
Loss in value: 80% in 9 months
Industry: Online retail
The story: The online coupon site has been on life support for years, as consumers and businesses look for better deals. Improper accounting caused the SEC to take a closer look, followed by lawsuits from customers and investors.
Of course, there’s a great deal more to all of these stories. LinkedIn and Twitter had much smoother IPOs than Facebook, which had a sharp price drop after its IPO before rebounding slowly. The late-in-life IPO from GM proves that even bankruptcy can be the first stage of a new beginning. The only thing that really matters in terms of winners and losers in the stock market is who is trending right now.