Here’s some news that won’t come as a big shock to anyone who is skeptical about splashy initial public offerings: Despite initial euphoria, high-profile Internet-related IPOs perform no better than those not-so-exciting non-Internet IPOs. On average, both types are under water from their original pricing.
Internet IPOs have certainly enjoyed big one-day moves after the stocks start trading. LinkedIn Corp. jumped 109 per cent when it debuted in May; Groupon Inc. rose nearly 31 per cent, and that was when the overall stock market was rocky. According to Dealogic (via The Wall Street Journal), the average gain among Internet-related IPOs on the first day of trading this year is an amazing 28 per cent, versus just 7 per cent for non-Internet IPOs.
The initial gains can trigger feelings of envy among investors who didn’t participate. However, the cold facts from Dealogic suggest that investors should have nothing envy. Both Internet and non-Internet IPO stocks, on average, are down 8 per cent from their original starting points.
So far, LinkedIn and Groupon are exceptions. The stocks are up 70 per cent and 16 per cent, respectively, from their IPO prices – even though both have slipped considerably from their earlier highs. But as the Journal points out, stocks like Renren Inc. and Pandora Media Inc. have dragged the average down.