Ooops! One in three tech IPOs now trading below their starting price

Around 33 per cent of the technology companies to enter the market in the last ten years are currently valued at a price lower than their IPO mark. This according to researchers with analytics house Geckoboard, which studied 100 software, hardware, and social networking companies that have undertaken IPOs since 2006. Of those …

[Paul Crawford]

Why?

some the biggest jumps were seen by Facebook (up 249 per cent), VMware (up 95 per cent), and LinkedIn (up 199 per cent)

VMware at least makes something useful, but WTF is the real value of Facebook or Linkedin? Is whoring your users from advertiser to advertiser really that profitable?

[Geoff Campbell]

Re: Why?

Seems to be.

Although to be fair to Facebook, they also make money from sales of game services, too. This used to be a big earner for them, back in the Farmville days, I don't know what the current figures are.

GJC

[MonkeyCee]

Re: Why?

"Is whoring your users from advertiser to advertiser really that profitable?"

Short answer, yes.

Bear in mind that various traditional media, with far more real-world costs (newsprint, radio, TV) can make good money purely on selling adverts. Hence why "free" papers continue to be profitable.

Facebook is a media company where other people generate the content. Much like Google and the various other social media platforms. It's just much much MUCH more personally targeted, both data gathering and in advertising.

The part that bothers me most is less the shilling of goods and services, it's the influence and manipulation that FB et al are being paid directly to do. Political advertising is obviously not illegal, but is influential when you can target specific demographics with just the right sort of article/ad.

FB and the Tories have kept a bit of a lid on it, but the 2015 election win is widely held to have been due to micro targeted advertising campaigns through FB aimed at swing voters in tight races. There's some suggestion that the negative campaigning worked even better, persuading Labour voters to switch to SDP/Greens/UKIP in races the cons couldn't win.

Considering how effective gerrymandering has been in the UK and USA for breaking representative democracy, and the resistance to any form of change to the systems, this will just allow an even more effective form of forging consent and ensuring people vote the right way, even if for the wrong reasons.

No idea how to deal with it either. Obviously banning political advertising is Not Cool, since that can pretty much be used to cudgel any dissident opinion, and requiring warnings like "this utterly baseless piece of propaganda was brought to you by $Party" is going to be dodged pretty quickly, since there are plenty of think-tanks etc that can be used to front someone else's agenda.

So since FB can probably now sell you the ability to win an election, I'm pretty sure they've got their money+power printing machine running quite nicely thanks.

I'm sure there's a modern equivalent to "Never pick a fight with someone who buys ink by the barrel", it'll be interesting to see what happens if some party pisses off Zuck enough for him to break them.

[Naselus]

Re: Why?

"Is whoring your users from advertiser to advertiser really that profitable?"

Advertising is a half-a-trillion dollar industry. For context, that's about 10 times the size of the entire enterprise hardware market (phones, desktops and servers).

[Anonymous Coward]

Re: Why?

"Advertising is a half-a-trillion dollar industry."

True enough, but no less appalling because of it.

[CheesyTheClown]

Re: Why?

VMware went to shit when it became board controlled. All their competitors are miles ahead of them in every area and VMware, possible the most innovative company of the first five years of the millennium has become a "me too... kinda" company. Hardware support for virtualization has eliminated competitive edges in hypervisors. It's become about integration and management of which VMware is thoroughly lacking. Even now, they actually sell their system APIs blocking developers from establishing a community and ensuring their vendors will get innovative features first.

Facebook and others actually produce a surprising amount. In the case of Facebook, they provide massive amounts of innovative technology to the community. Oh... and they have managed to monetize the shit out of their platform.

[John Smith 19]

Actually 2/3 above IPO is pretty amazing.

I'd thought it would be much worse.

" software companies were the safest bet "

Not quite vague to the point of meaningless.

But close.

[Naselus]

Re: Actually 2/3 above IPO is pretty amazing.

Doubly so, given the absurdly inflated market for pre-IPO tech companies currently.

[Anonymous Coward]

Interesting data

However, stock prices are a garbage bellwether for measuring anything other than what some lemmings with too much money think about where they should piss away some extra money. You might as well ask a hedgehog what it thinks the IPO price will be in some number of time units from some point in time. The answer will be frightfully similar.

[Youngone]

Re: Interesting data

I was wondering what the respective values of say VMware and Facebook will be in 10 years time?

My guess would be VMware will still be up there, and Facebook won't be.

I could certainly be wrong however.

[Ian 55]

'and Facebook won't be'

We live in hope.

[Michael Hoffmann]

Ask a what?

Don't expect an answer on that from a hedgehog.

It can never be buggered at all.

[Your alien overlord - fear me]

Thought LinkedIn was now a Microsoft division?

[a_yank_lurker]

Not a surprise

That many companies have lower stock prices than their at the IPO is not surprising since the IPO is basically rolling the dice. Many ideas that look good are actually pretty stupid if one steps back from the hype. Also, how many floundering start ups were bought up cheap by someone who was looking for IP rights.

[John Smith 19]

"many companies have lower stock prices than their at the IPO is not surprising "

That's not the surprise.

The surprise is that so many (2/3s) are trading above their issue price.

Given the notion that VC's (who will always push for an IPO as an exit strategy, usually sooner rather than later) are looking at a 60-90% failure rate that most of those IPO are >= IPO price is really pretty astonishing.

[Sorry that handle is already taken.]

Re: "many companies have lower stock prices than their at the IPO is not surprising "

I thought that definition of failure was pissing all the money away without even making it to an IPO?

[John Smith 19]

"I thought...failure was pissing all the money away without even making it to an IPO?"

Not necessarily.

As long as you've bagged a fairly hefty salary and found some way to "return value" to your personal fortune the fact you've failed to deliver an actual product (SW, HW or service) is not a problem.

As the CEO of that medical testing chip company knows quite well.

[Sorry that handle is already taken.]

Re: "I thought...failure was pissing all the money away without even making it to an IPO?"

To clarify, I meant the VCs lose if they don't make it to IPO.

[Tom 7]

Is that all?

And whoever said investment was guaranteed a profit?

Now you know why the banks just kept hold of 'their' quantitative easing.

[Anonymous Coward]

Goldman Sachs

Pump and Dump scam artists. They profit. The great unwashed lose.

[Cuddles]

Inflation

As far as I can tell, these are just the raw numbers being quoted - the nominal dollar value of the IPO compared to the nominal dollar value of the company today. But inflation is pretty significant over the course of a decade - cumulatively over 20% over the last 10 years. That means a company like Pandora, which is counted here as having increased in value by 3% since its IPO, has actually decreased by something around 5% in real terms. Just from a quick glance over the list, there are at least three (Pandora, Workiva and Alibaba) which have lost value in real terms even though they're counted as successes here.

Also, while it's not technically wrong, it seems a bit odd to describe 33/100 as "around 33%".

[Anonymous Coward]

Fudged numbers

Are pretty much the basis for inflating value in any public company.

What you get in earnings calls is the tip of the iceberg shining in the sun, if they actually talked about the massive chunk under the waves everyone would run to the hills.