This time last year 19 companies had made an initial public offering. Not one company has gone public since Facebook went public last month, and 14 companies have delayed or withdrawn their IPO plans, why is that? Additionally, there is not one public offering scheduled for this week, thanks mainly to the European debt crisis. Coloradoans might be wondering if Facebook’s rather inauspicious start may be partly or perhaps entirely to blame for the recent drop in new IPOs.
Some venture capital companies are saying the debt crisis and current state of financial markets has not been encouraging for new IPOs, especially new technology companies, however there is no doubt Facebook’s public launch could be playing a role as well. According to the president of IPOdesktop, Facebook’s launch sucked much of the energy out of the air for what many thought might be the beginning of a new era for the Internet industry.
Many thought the launch was the ‘big one’ that would unleash a current of new investment in technology-related startups, but it just has not happened. Instead, a slew of investor lawsuits sprang up while share value dropped. The $16 billion initial public offering has many in the technology sector feeling uneasy. Facebook’s stock started out at $38 per share, reached a high of $45 before falling below $26 before leveling off at just over $33 by the week’s end.
And it’s not just Facebook at issue either. Other Internet companies are also trading below their IPO stock price, including Zynga Inc., Groupon and Pandora Media Inc. There has been much criticism surrounding Facebook’s IPO launch, from the technical glitches at Nasdaq to Morgan Stanley’s handling of the IPO, as well as the last-minute increase in the stock’s offering price.
Many investors are optimistic that Facebook will bounce back from the IPOs initial setbacks, but they also agree it has left a feeling of pessimism in the marketplace. One bright spot is that a partner at venture capital firm, Institutional Venture Partners said his company is not shying away from public offerings with its portfolio because it feels there is still a great demand for technology companies in the public sector.
Source: The Associated Press, “The pop that wasn’t: Life after Facebook’s IPO,” Barbara Ortutay, June 24, 2012