Risk is inherent in IPOs. After all, many of these companies are young and might have unproven business models. And in most cases, competition is a big problem, too.
Still, some deals are worse than others, and the past year has seen its fair share of horrible performers. Out of 131 deals since last May, 25 have lost at least 20% of their value. However, some of the worst deals have seen companies lose more than half their value in a year or less!
How bad were these stinkers? Let’s take a look with this breakdown of the five worst IPOs since May 2011:
Zeltiq Aesthetics: -56%
Zeltiq Aesthetics (NASDAQ:ZLTQ) develops a fat-burning machine called CoolSculpting. It uses controlled cooling to help to reduce people’s stubborn fat bulges through a natural process known as apoptosis.
But since coming public, the company has put together a pair of horrendous earnings reports that showed losses of almost double consensus estimates.
One problem has been the competition, but the company also has had a tough time with its marketing campaign, called “Let’s Get Naked” — a fun concept, but one that lacks a clear message.
When Renren (NYSE:RENN) came public in April 2011, it was hailed as the “Facebook of China.” Now, it looks more like MySpace.
Renren at least has been headed in the right direction — it grew revenues by 57% in the most recent quarter, and it turned a profit. However, those revenues were for about $32.8 million. Hardly Facebook-esque — the House that Zuckerberg bilt brought in $1 billion. Renren also has about 38.4 million monthly unique logins, while Facebook has more than 900 million monthly active users.
Horizon Pharma: -60%
It’s been a tough year for biotech IPOs. Investors don’t like the uncertainty of FDA approvals, and biotech companies also usually need to raise more money after their IPOs, such as from debt and equity offerings. Horizon Pharma (NASDAQ:HZNP) isn’t much different.
Horizon boasts a drug called Duexis, which helps to treat rheumatoid arthritis. It also is awaiting approval for a another drug — Rayos — for the same disease. And over the years, it could be a big winner.
However, in the meantime, the company has suffered through huge losses. EPS over its past few reports read like a horror story: -$1.23, -$3.91, -$0.93. And that middle loss was triply worse than what Wall Street expected. Through it all, HZNP shares have been throttled.
Lone Pine Resources: -60%
Since coming public in May 2011, the shares of Lone Pine Resources (NYSE:LPR) — a Canadian oil & gas producer — have been thrown through the grinder.
Why the big loss? About 73% of Lone Pine’s overall production comes from natural gas, which has seen a massive plunge in its price. The company remains profitable, but the growth hasn’t been up to Street expectations.
Things might get better if natural gas rebounds, but for now LPR remains one of the biggest dogs of the past year.
FriendFinder Networks: -88%
FriendFinder Networks (NASDAQ:FFN) operates a variety of adult websites, such as AdultFriendFinder.com, Amigos.com, AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com, and SeniorFriendFinder.com. It went public in May 2011 at $8 per share, then the floor fell out as FFN spiraled to Friday’s close just above $1.
The business has been regressing, with the company experiencing significant difficulty in Europe. From fiscal 2010 to 2011, revenues fell from $346 million to $331 million, and in the most recent quarter, FFN posted a surprise loss of 9 cents per share. The company also has a large debt load of about $463 million. Meanwhile, FriendFinder’s cash balance is only $34.5 million, which itself is down from $42 million a year ago.
FriendFinder has been trying to turn things around. It has seen traction with its live interactive videos, and the company also is upgrading its platform to help increase advertising revenues.
Something needs to work, or underperformance will put FFN shares to bed.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.