Free Annual Reports
2011's Biggest IPOs
2011 was another big year for eagerly awaited initial public offerings (IPO) as trendy technology companies stole most of the spotlight. Perhaps the biggest development was a slightly new method for bringing private companies to the public market. (To know more about IPO, read: How An IPO Is Valued.)
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.
Early Pop, Quick Drop
Two words best characterize the IPO scene in 2011: low float. IPO underwriters intentionally limited the number of shares initially released to market. This was done so that investors who participated in the deal would realize an immediate pop the day the stock debuted. The limited release sparked artificial demand, causing shares to rally hard on the first day of trading. After the euphoria wore off, many of these stocks would plummet soon after.
Shares of Linkedin Corporation (NYSE:LNKD) more than doubled the IPO price of $45 on the first day of trading in May 2011, less than 10% of the shares were released. That's substantially less than what is traditionally offered, even for technology companies. This new low-float trend would continue throughout the year. The initial surges were due, not to strong demand, but extreme undersupply. By the end of November 2011, the online professional network lost roughly 30% of its value.
Internet radio company Pandora Media Inc (NYSE:P) mirrored LinkedIn, soaring on a light float IPO, only to plummet soon after. In fact, most high profile IPOs are down sharply. From the first day of public trading through the end of November 2011, deal-of-the-day marketer Groupon Inc. (Nasdaq:GRPN) fell about 33%, car sharing network Zipcar Inc (Nasdaq:ZIP) declined about 41%, Russian search engine Yandex (Nasdaq:YNDX) plunged about 45% and hospital operator HCA Holdings (NYSE:HCA) lost about 22%.
Winning IPOs
2011 was a tough environment for some newly public companies to begin trading in; abnormally high levels of unemployment persisted and global growth stagnated. Then, the Japanese earthquake in early March sent tremors throughout the global economy. The latter half of the year was dominated by the ongoing sovereign debt crisis centered in Europe.
Despite these obstacles, there were a few notable companies that managed to advance following their IPO. Advertising research firm Nielsen Holdings (NYSE:NLSN) climbed more than 15% from the January IPO until the end of November, Spirit Airlines Incorporated (Nasdaq:SAVE) gained 39% through its first six months of trading and nutritional supplements provider GNC Acquisition Holdings (NYSE:GNC) soared about 63% from their April IPO.
The Bottom Line
2011 was a big year for eagerly awaited IPOs. 2012 will be no different. Facebook, Zynga and Yelp highlight what is anticipated to be a busy IPO calendar in the early portion of the year. Facebook is expected to raise close to $10 billion in its IPO, putting the social network's value somewhere around $100 billion. That follows Renren Inc (NYSE:RENN), the so-called "Facebook of China" whose performance, following the May 2011 IPO, has been extremely underwhelming. Zynga, the social network game developer that relies heavily on social media platforms like Facebook, is expected to raise $1 billion in their own impending IPO. Will these hot issues follow LinkedIn's lead, or will they chart their own path? (For additional reading, check out: Market Volatility, Weak Economy Delay Major IPOs.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Matt Cavallaro did not own shares in any of the companies mentioned in this article.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.
Early Pop, Quick Drop
Two words best characterize the IPO scene in 2011: low float. IPO underwriters intentionally limited the number of shares initially released to market. This was done so that investors who participated in the deal would realize an immediate pop the day the stock debuted. The limited release sparked artificial demand, causing shares to rally hard on the first day of trading. After the euphoria wore off, many of these stocks would plummet soon after.
Shares of Linkedin Corporation (NYSE:LNKD) more than doubled the IPO price of $45 on the first day of trading in May 2011, less than 10% of the shares were released. That's substantially less than what is traditionally offered, even for technology companies. This new low-float trend would continue throughout the year. The initial surges were due, not to strong demand, but extreme undersupply. By the end of November 2011, the online professional network lost roughly 30% of its value.
Internet radio company Pandora Media Inc (NYSE:P) mirrored LinkedIn, soaring on a light float IPO, only to plummet soon after. In fact, most high profile IPOs are down sharply. From the first day of public trading through the end of November 2011, deal-of-the-day marketer Groupon Inc. (Nasdaq:GRPN) fell about 33%, car sharing network Zipcar Inc (Nasdaq:ZIP) declined about 41%, Russian search engine Yandex (Nasdaq:YNDX) plunged about 45% and hospital operator HCA Holdings (NYSE:HCA) lost about 22%.
2011 was a tough environment for some newly public companies to begin trading in; abnormally high levels of unemployment persisted and global growth stagnated. Then, the Japanese earthquake in early March sent tremors throughout the global economy. The latter half of the year was dominated by the ongoing sovereign debt crisis centered in Europe.
Despite these obstacles, there were a few notable companies that managed to advance following their IPO. Advertising research firm Nielsen Holdings (NYSE:NLSN) climbed more than 15% from the January IPO until the end of November, Spirit Airlines Incorporated (Nasdaq:SAVE) gained 39% through its first six months of trading and nutritional supplements provider GNC Acquisition Holdings (NYSE:GNC) soared about 63% from their April IPO.
The Bottom Line
2011 was a big year for eagerly awaited IPOs. 2012 will be no different. Facebook, Zynga and Yelp highlight what is anticipated to be a busy IPO calendar in the early portion of the year. Facebook is expected to raise close to $10 billion in its IPO, putting the social network's value somewhere around $100 billion. That follows Renren Inc (NYSE:RENN), the so-called "Facebook of China" whose performance, following the May 2011 IPO, has been extremely underwhelming. Zynga, the social network game developer that relies heavily on social media platforms like Facebook, is expected to raise $1 billion in their own impending IPO. Will these hot issues follow LinkedIn's lead, or will they chart their own path? (For additional reading, check out: Market Volatility, Weak Economy Delay Major IPOs.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Matt Cavallaro did not own shares in any of the companies mentioned in this article.
by
Matt Cavallaro
Matt Cavallaro is Senior Equity Analyst for BetterTrades. Matt previously worked in Merrill Lynch's private client group and as an analyst with Laidlaw & Company, a full-service investment banking and brokerage firm. Matt graduated from Emory University with a B.A. in Economics, and is a Chartered Financial Analyst Candidate and Chartered Market Technician Affiliate.
Free Annual Reports
