Google+ May Be a Minus for Social-Network IPOs

Jul 12, 2011, 1:10 pm EDT
Google+ May Be a Minus for Social-Network IPOs

Whenever I hear that an investment trend is a sure thing, I instantly get skittish.  After all, in today’s hyper-competitive world, which is also beset with huge economic challenges, things can turn sour quickly.

So, yes, the latest sure thing is that the IPOs of Facebook, Zynga and Twitter will be mega hits.  That take is based on solid logic — hey, despite yesterday’s plunge in the market, LinkedIn’s (NYSE:LNKD) shares were actually up (going above the $100 mark).

But in the social world, a hot property can easily become a ghost town.  A recent example of this, of course, is MySpace, which was recently sold for a pittance.  There are many other examples, like Friendster and Tribe.  Often, these failures were the result of poor execution and the fickleness of users. Read 

Zynga — 3 Pros, 3 Cons

Jul 5, 2011, 12:24 pm EDT

When Mark Pincus founded Zynga in 2007, his mission was to connect the world through games.  He thought it would become a significant activity on the Web.

It turned out to be a huge idea – and his team has executed extraordinarily well.  Zynga is now the dominant player in social games.  In its short history, the company has generated $1.5 billion in bookings with franchises like CityVille, FarmVille, Mafia Wars, Words with Friends and Zynga Poker.  The company also generates substantial net income and cash flows. 

In fact, more than 90% of revenue comes from selling digital items.  These include castles, animals, farm equipment and so on.  It’s a tantalizing business model. Read 

Zynga Zooms Into IPO Sweepstakes

Jul 1, 2011, 3:58 pm EDT
Zynga Zooms Into IPO Sweepstakes

Over the past few months, Wall Street has shown its hunger for growth companies – especially those riding the “social” wave.  No doubt, the huge interest in the LinkedIn (NYSE:LNKD) offering was a taste of this.

But now the investment community will get what it wants: deals from the hyper-growth social companies.  After much anticipation, Zynga has filed its plans for an initial public offering.

The company appears to be riding a rocket.  Of course, Zynga is the creator of major gaming franchises like CityVille, FarmVille, Mafia Wars, Words with Friends and Zynga Poker.  In fact, the company’s daily active users are more than the next 30 social game developers combined. Read 

IPO Quiet Period Trades May Bring Loud Returns

Jun 30, 2011, 10:18 am EDT
IPO Quiet Period Trades May Bring Loud Returns

Since its high-profile IPO on May 19, shares of LinkedIn (NYSE:LNKD) have had a steady fall — they have gone from $122.70 to a low of $60.14.

But on Tuesday, the bulls rushed into the stock, as the price surged by 12% to $85.56. While the overall rally in the equities markets was a help, the major factor was the expiration of the so-called “quiet period” — the last 40 days after the IPO, after which Wall Street underwriters can initiate research.

As should be no surprise, LinkedIn got glowing coverage. There were buy ratings from firms like UBS, Morgan Stanley, JPMorgan and Bank of America. Read 

Steer Clear of Chinese IPOs

Jun 10, 2011, 10:44 am EDT

Since the financial crisis of 2008, investors have been searching for ways to get growth companies into their portfolios.  One place to find them has been with China’s hot IPO market.

The problem:  it’s going cold quickly.  In fact, the Securities and Exchange Commission has issued a bulletin to warn investors about the risks of Chinese stocks. 

The agency is particularly concerned about reverse mergers.  Essentially, these are IPOs that launch in the U.S. market by merging into a corporate shell.  Because of this, it is often easier to avoid disclosures.  Read 

Groupon Founders Spotty History a Cause for Concern

Jun 6, 2011, 11:41 am EDT
Groupon Founders Spotty History a Cause for Concern

Last week, there was definitely much excitement when Groupon filed to go public, announcing it will trade its stock under the ticker GRPN.  However, after the things calmed down, people started to wonder:  the company has been losing gobs of money.  Actually, it comes to about $540 million since its launch in 2008. So why would Groupon stock be such a hit?

OK, the company needs to make significant investments to scale its operations across many cities.  Yet it also costs huge amounts to get new customers.  The fact is that there is much competition in the market, such as from LivingSocial, which is backed by Amazon.com (NASDAQ: AMZN), as well as new entrants like Google (NASDAQ: GOOG) and even Facebook via Facebook deals.

The CEO of the company, Andrew Mason, wrote a letter to “potential shareholders” for the IPO filing and made an interesting request — that is, he said investors should ignore the marketing costs. Read 

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