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Social IPOs for 2011: $32.7 Billion in Value

However, returns averaged a grueling -29%


Going into 2011, it looked like the markets were poised for an explosion of social IPOs. In January, Goldman Sachs (NYSE:GS) arranged a $1.5 billion investment in Facebook — at a whopping $50 billion valuation. Nice way to rev things up, right?

It was also a nice boost for LinkedIn (NYSE:LNKD). In mid-May, the company priced its IPO at $45 a share, raising a cool $353 million. On its first day of trading, the stock soared 109%.

Yet by July, the environment suddenly got hostile. A big problem was the budget fight on Capitol Hill. There was also the crisis in Europe. These factors were enough to delay major IPOs, including those for Groupon (NASDAQ:GRPN) and Zynga (NASDAQ:ZNGA).

So here’s how things turned out for social IPOs in 2011:

company ticker revenues market cap return
LinkedIn LNKD $435M $6.15B -33%
Pandora P $203M $1.62B -43%
Zillow Z $55.5M $619M -37%
Zynga ZNGA $1,024B $9.4B -0.9%
Groupon GRPN $1,290B $13.1B -21%
HomeAway AWAY $217.1M $1.8B -42%
Total $3,224.6B $32.76B

On average, the return was a grueling -29% even though valuations continued to be at nosebleed levels — trading at roughly 10 times revenues!

It’s true that these companies are growing at hefty rates. But with a slowing economy, there could be some deceleration. Besides, those huge valuations are attracting lots of competition. These include startups — which are attracting large slugs of venture capital — as well as Internet veterans such as Google (NASDAQ:GOOG) and (NASDAQ:AMZN).

Something else to consider: Over the next few months, more stock from these social IPOs will hit the market. This is because of the expiration of lock-up periods, which prevent insiders from selling stock (usually for six months after the offering).

In other words, the new year could see more deterioration in valuations and might put further pressure on upcoming IPOs — even Facebook.

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 “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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