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5 Awful IPOs From the Past Year

Even amid a strong market, we've seen some dud deals

By Tom Taulli, InvestorPlace Writer & IPO Playbook Editor

BearPromoIf you invested in some initial public offerings during the past year, you’ve probably made some nice gains. Some of the biggest IPO success stories have included doublers like cloud-based app providers ServiceNow (NYSE:NOW) and Workday (NYSE:WDAY).

But despite the euphoria found among many newly public companies, we’ve also seen our share of downright awful offerings.

Here’s a look at a few of the more notable failures:

Midstates Petroleum

MidstatesPetroleum185Change From IPO Price (4/20/12): -56%

Midstates Petroleum (NYSE:MPO) got off to a good start when it came public in April 2012, returning 15% on its first day, but things have only gotten worse since then.

MPO, which was founded about 20 years ago, is an oil and gas exploration and development company that is focused on the Upper Gulf Coast Tertiary of Louisiana and in the Mississippi areas. A key strategy has been to use sophisticated technologies — 2-D and 3-D seismic data — to locate deposits in areas that were once considered to be barren. Horizontal drilling and fracking also have been key.

However, crude oil prices have been weak lately, and for a company like MPO — which does not have a diversified footprint across various business segments like a Chevron (NYSE:CVX) or Exxon Mobil (NYSE:XOM) — that means the core business is vulnerable to drops in cash flows.


PrintChange From IPO Price (4/25/12): -82%

Envivio (NASDAQ:ENVI) went public in late April at $9 a share, then dropped like a rock.

Envivio develops software for Internet-based video processing that helps deliver higher speeds and quality while compressing the storage.

The problem? The company has felt the residual pain from sluggish global economic growth as telecom and cable customers cut back on spending. Revenues have decelerated — a trend that likely will continue.


Facebook185Change From IPO Price (5/18/12): -33%

While there were a few doubts about the Facebook (NASDAQ:FB) IPO amid all the pre-offering euphoria, few imagined how bad the deal would end up being.

A series of botches hampered the offering, and by early September, FB stock dropped to a low of $17.55.

Of course, Facebook has curbed its IPO woes, as CEO Mark Zuckerberg seems to have responded to the brutal plunge. He quickly dropped his idealistic ways and started to talk about mobile and monetization, with those efforts having worked so far and shares rebounding about 50% off the bottom.

Nonetheless, the IPO remains a big loser for early investors, even if the $16 billion windfall was a big win for Facebook.

Professional Diversity Network                                       

Professional Diversity NetworkChange From IPO Price (3/5/13): -39%

Professional Diversity Network (NASDAQ:IPDN) is in a hot category, operating websites that allow networking for professionals, with a focus on Hispanic and black clients.

Investors were hoping that this company would be another LinkedIn (NYSE:LNKD), which has gained more than 300% from its May 2011 IPO.

However, IPDN is a very small player — last year, revenues improved only 11% to a mere $6.2 million — and has demonstrated how tough it can be for microcap deals to perform.

WhiteWave Foods

White Wave Foods 185Change From IPO Price (10/26/12): -3%

WhiteWave Foods’ (NYSE:WWAV) IPO doesn’t look horrible on the surface, with the company just slightly down since its October offering.

Instead, the disappointment is found in the context.

WhiteWave operates in the natural and organic foods industry, so investors were expecting a nice move to the upside like other IPOs in the space: Annie’s (NYSE:BNNY, +96%), or then there’s Natural Grocers by Vitamin Cottage (NYSE:NGVC, +55%).

However, IPO valuations can get out of whack sometimes, and WhiteWave investors learned that the hard way as the company left little room for investors to make a buck.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities, and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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