The Wall Street Journal is reporting that Facebook Inc. is getting ready to file papers for an initial public offering, as early as next Wednesday. The deal could raise $10-billion (U.S.) and value the company at as much as $100-billion.
As IPOs go, this one is a biggie: It would mark the largest technology IPO by a long shot (by comparison, Google Inc. raised just $1.9-billion in 2004). And, as the Journal puts it, it will be a “defining moment for the latest Web investing boom.”
Let’s hope that defining moment translates into steadier gains for investors, because the first batch of social media IPOs wasn’t kind to them in 2011. According to Birinyi Associates (via Mashable Business), 82.4 per cent of the 19 social media IPOs last year ended the year below their opening-day prices; just three of those 19 stocks were trading above their opening prices.
But there is an upside here. First of all, most IPOs tend to have a rocky start. Last year, two-thirds of all IPOs ended the year below their IPO prices (which is separate from opening prices), while less than 60 per cent of social media stocks ended the year below their IPO prices – which means that they slightly outperformed other IPOs.
The other bit of good news is that some of the key names among social media IPOs are off to a good start in 2012. Zynga Inc. has risen 6.1 per cent, beating the 4.7 per cent gain by the S&P 500. LinkedIn Corp. has risen 18.8 per cent, Zillow Inc. has risen 22.1 per cent and Pandora Media Inc. has risen 35.9 per cent. Groupon is the outlier here, falling more than 2 per cent.
Curiously, most of these names enjoyed big pops on Friday afternoon, after the Facebook news began to circulate. LinkedIn, for example, was up 5.9 per cent in afternoon trading.