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

The technical term for this, in the financial world, is: 'Boned'

empty pockets

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 100 companies, 67 are trading above their IPO valuation and 33 are below.

Among the 33 are Twitter (down 49 per cent), Zynga (down 66 per cent), and Groupon (down 84 per cent). Meanwhile, some the biggest jumps were seen by Facebook (up 249 per cent), VMware (up 95 per cent), and LinkedIn (up 199 per cent).

In general, the Geckoboard report suggests software companies were the safest bet to maintain their value. Gaming, meanwhile, had the lowest number of companies now above their IPO price.

The report also suggests that companies with larger founding groups tend to fare better. The study showed companies with at least three founders achieved the highest levels of growth, and companies with two founders also saw higher growth levels than those with just one.

Researchers estimate that the best time to undertake an IPO is when a company is between six and nine years old, as going public earlier or later decreases the chances of success.

The study comes as Snapchat parent Snap Inc is expected to make its eagerly anticipated IPO soon at an expected value of $25bn. That would be the fourth-largest in the last 10 years, says Geckoboard. That market debut is already running into problems, with allegations that the company has been fudging the numbers it gives to advertisers and investors.

Geckoboard notes that the social networking space Snap operates in has been a mixed bag for IPOs, with big winners like Facebook and LinkedIn contrasted to the likes of GroupOn and Twitter. ®


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