Have you ever dreamed that you were naked in public?
Having your IPO fail miserably probably feels worse.
When a company goes public it releases an IPO, or Initial Public Offering. The company is valued and then they start selling stocks at a price that meets their valuation number. Many companies survive this initial stage but some sink faster than the Titanic!!!
Here’s a list of the biggest IPO flops in history.
Webvan, an online grocery store, was one of the largest dotcom flops during dotcom bubble of the late 90’s. Webvan promised to deliver goods to consumers within a 30 minute window of their choosing, prompting them to build a multi-million dollar warehouses in some of the most populous American cities. From its high of $30 a share, it would plummet to only pennies a few months later and by 2001, Webvan was bankrupt. They’d burnt through more than $800 million in VC and IPO funding.
eToys was forecast to be the online toy store that would revile industry giant, Toys R’ Us. Things looked promising for the company in the midst of the dotcom bubble. During their IPO in 1999, shares were issued at $20 and soared to a staggering $76 by the end of the first trading day. Less than 2 years later, eToys went bankrupt as the company was unable to refine their business model. To add insult to injury, Toys R’ Us now owns the etoys.com domain.
One of the most well-known dotcom bubble flops of all time was Pets.com. Pets.com delivered pet supplies straight from their website to your door step. It was the first time you could shop for a dog bone on the World Wide Web, and the general consensus was this company was about to take off.
However, rather than focusing on building a business, they built their brand. In January 2000, the company aired its first national commercial as a Super Bowl ad, which cost the company $1.2 million. During its first fiscal year, Pets.com earned revenues of $619,000, yet spent $11.8 million on advertising. 268 days after it’s IPO that raised $82.5 million, the company closed its doors.
Our last entry from the dotcom bubble is Boo.com, an online fashion retailer from London. As with other dotcom busts, Boo.com had a meteoric rise and subsequent devastating collapse. One of Boo’s problems was how incompatible its website was with internet speeds at the time. Their pages, suited for 56k modems and above, would take ages to load at a time where not many people had internet connections that could handle the amount of bandwidth from the Boo website. Boo lasted 18 months from launch to bankruptcy.
5. CIT Group
In 1999 CIT Group was struggling to survive before being bought by Tyco.Tyco then decided it was time for CIT Group to go public. The IPO raised over $4 billion!!! Unfortunately, by the late 2000’s CIT Group had gone bankrupt. An incredible 10 year journey for a company that was founded in 1908.
Zynga, is a video game developer running a social video game services. The name might not sound familiar, but we’re sure the name FARMVILLE rings a bell. we’re still having nightmares over all those facebook invites!
Zynga holds the dubious distinction of having one of the worst first-year losses post-IPO. The company was valued at $7 billion after raising $1 billion in the initial public offering.Unfortunately for CEO Mark Pincus, the stock plunged 74% in its first year.
Groupon, the real winner (or loser) of the whole bunch.
In their first year of being traded publicly, Groupon posted an 85% drop in the price of their shares. The stock closed at $26.11 on the first day of trading, in Nov 2011, but slumped to under $4 a share by the end of 2012. Their deals aren’t the only things that are heavily discounted.
Let’s end this post with a happy story!!!
In 2012 the investment community was buzzing with excitement. Facebook was going public! Though the IPO was surrounded by A LOT of hype, the stock price plummeted at closing. They even had to rely on a fail-safe that was put in place after the stock market crash of 1987 in order to keep the Facebook from drowning on its first day as a public company. The initial shares were sold at $38 but that number was slashed in half by the end of 2012.
Today Facebook is alive and well, trading at a whopping $152 a share. Proving that a company can always recover from an embarrassing and almost detrimental IPO flop. As investors, another lesson we can take from the Facebook IPO is; don’t panic!!! The investors that kept their heads and held onto their shares of the company ended up seeing (roughly) a 300% return.