Timing is everything in life and in the markets, especially for initial public offerings (IPOs). Going public means issuing shares in a company for the first time and offering them for sale on a stock exchange such as the New York Stock Exchange or the Nasdaq. What often happens, but not always, is that the IPO stock price is bid up beyond its initial offer price. (To learn more about IPOs, check out How An IPO Is Valued.)

TUTORIAL: IPO Basics

Rise and Fall
LinkedIn shares doubled in price in one day on the New York Stock Exchange on its IPO. At its high on the day the stock was first traded, it climbed 171% above its issue price. Firms that issue IPOs hope the price of their shares rise, but few would expect such an unusual spike in the value of their equities. Typically, brokerage firms which underwrite the stock offered in the IPO expect a 15% increase over issue price.

It was not a good year generally for IPOs, with more than 50% of the issues launched in 2011 currently trading at less than their IPO price. When the market is too volatile and unpredictable, as it has been recently, several major firms which have planned IPOs have delayed their market offerings until market conditions stabilize. Some additional factors may also have influenced their decisions to postpone issuing stock. Beyond market volatility is the struggling U.S. economy, with slow, sporadic growth and an almost 10% unemployment rate. This combination of negative conditions is not thought to be conducive to IPOs. (For some IPOs, who did not do so well, read The Biggest IPO Flops.)

IPOs on Hold
Among the planned IPOs of notably large, well-capitalized companies now on hold are Groupon, Zynga and Facebook. Groupon, which operates nationwide, is the country's largest Internet coupon vendor and offers daily online discounts on a variety of goods and services in cooperation with local businesses like restaurants and travel agencies. One estimate of the anticipated valuation of the Groupon IPO pegged the stock value at $20 billion. With that immense potential, Groupon has not canceled its offering, but is instead watching the market for a more favorable time to go public.

An additional factor in the Groupon IPO delay was a request by the Securities and Exchange Commission for the firm to eliminate an accounting calculation in its IPO filing which, according to The Wall Street Journal, "painted a more robust picture of its [Groupon's] performance."

According to some investors, negative media coverage on this issue was also a factor in the IPO delay. A number of similar coupon deal firms have been established since Groupon was founded and they are becoming significant competitors. Groupon's recent losses may be attributable, at least in part, to the new competition. Still, the company's executives are watching for market conditions to calm down and provide a window for its IPO.

Zynga, a major online video game site, also delayed its IPO because of market volatility, and to respond to questions from the U.S. Securities and Exchange Commission (SEC) regarding how the firm measures users and bookings. Investors also reportedly questioned Zynga's potential given the volatility and uncertainty of the current market. Zynga's IPO was expected to bring in close to $1 billion.

Facebook, the colossal online social media firm, which also anticipated an IPO this year, recently announced it would delay going public until at least September, 2012. Estimates of Facebook's value range from $50 billion to $100 billion, and its IPO could be one of the biggest in market history.

The Bottom Line
Although more than half of this year's IPOs are trading for less than their offer prices (as of Sept. 15), several are still in the black, including the giant real estate site, Zillow, which traded above its IPO price and above its first day close as of Sept. 14. Small investors don't usually get a chance to buy IPOs on their day of issue, but investors can buy a potentially profitable stock in the immediate days after issuance while the stock is still being bought and sold vigorously as it trends upward. (For more on IPOs and where they are coming from, check out Top IPO Nations.)

Related Articles
  1. Stock Analysis

    Moderna Therapeutics: An IPO Candidate in 2016?

    Find out the reasons why 2016 may be the year when highly valued biotech company Moderna Therapeutic files for an initial public offering (IPO).
  2. Stock Analysis

    Domo Inc: An IPO Candidate in 2016?

    Learn about key information on Utah-based technology startup Domo Inc. and how the Domo dashboard differentiates itself in the world of business intelligence.
  3. Stock Analysis

    GoDaddy Inc: How It's Fared Since the 2015 IPO (GDDY)

    Evaluate GoDaddy's stock performance since its April 2015 IPO, and determine how you would have fared had you invested in the company on day six.
  4. Stock Analysis

    If You Had Invested Right After Comcast's IPO (CMCSA)

    Evaluate how Comcast's stock has performed since the company's 1972 IPO, and learn how you might be a millionaire today had you invested a small sum in the IPO.
  5. Stock Analysis

    TransUnion - How It's Fared Since the 2015 IPO (TRU)

    Learn about the business of financial services company TransUnion and how the company's stock fared after its initial public offering in 2015.
  6. Stock Analysis

    AppNexus - An IPO Candidate in 2016?

    Find out the reasons why 2016 may be the year when the hot ad tech company, AppNexus, finally files for an initial public offering.
  7. Investing News

    Predicting the Biggest IPO of 2016

    Find out which tech startup company will bring life back to the struggling IPO market with the biggest initial public offering in 2016.
  8. Stock Analysis

    Shake Shack: How It's Fared Since Its 2015 IPO (SHAK)

    Learn about the performance of Shake Shack's stock and how you would have fared if you had purchased shares a week after the initial public offering (IPO).
  9. Stock Analysis

    Etsy: How It's Fared Since Its 2015 IPO (ETSY)

    Discover why Etsy had one of the worst IPOs of 2015, and how you would have fared as an investor had you invested in Etsy shortly after the IPO.
  10. Stock Analysis

    Party City Holdings: How It's Fared Since Its 2015 IPO (PRTY)

    Learn about Party City Holding's performance as a public company. Investors would have lost much more than the Russell 2000 Index by investing after the IPO.
RELATED FAQS
  1. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  2. When did Facebook go public? (FB)

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  3. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  4. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  5. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  6. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center