With stock market volatility suppressing initial manifeste offerings in current months, a number of were hoping Groupon Inc.'s (Nasdaq: GRPN) splashy IPO on Friday would spark a revival. But analyst skepticism over Groupon's long-term prospective customers and lingering fears more than the European debt crisis, and also the tepid U.S. economy, mean which the dry spell for your IPO market place will stretch on into subsequent calendar year.
On its first day of buying and selling, Groupon carried out superior than some expected, rising 30.55% to $26.eleven a reveal from its initial $20 for each reveal offer price tag. Few anticipate that pop to final, yet. And the sooner Groupon fades, the more discouraging it is going to be towards the dozens of suppliers seeking to go manifeste. "Not a person I've talked to, small or substantial, wants to hold it longer than a day," Scott Sweet, managing director of research site IPOBoutique.com, told MarketWatch. "They don't trust it.
Deserved or not, some of the investor mania for social media stocks - some of which went manifeste earlier this yr, like Linkedin Corporation (NYSE: LNKD) and Pandora Media (NYSE: P) and some of which are planning IPOs, like Facebook Inc. and Zynga Inc. - has rubbed off on Groupon. But Groupon's easily duplicated business model, fuzzy accounting practices and struggles to reach profitability have lots of experts questioning the daily-deal company's ability to survive, a lot less keep growing.
"I wouldn't touch it with a ten-foot pole," stated Money Morning Chief Investment Strategist Keith Fitz-Gerald. "This isn't a stock for an investor searching for a long-term play with stability." Furthermore, Groupon's IPO was structured to ensure the price tag spiked on launch. To keep demand artificially high, only 5.7% of the company, or 35 million shares, were floated. While in the neighborhood of other social media IPOs this yr such as LinkedIn (8.3%) and Pandora (9.2%), it is far below the 27% average IPO for tech businesses, not to mention the 40% average for all IPOs.
"The post-IPO investor will likely be taking a risk on this deal," Josef Schuster, founder of IPO research and investment house IPOX Schuster, told Reuters. "It is maybe an excellent trade for a day trader, in and out in a single day, but I don't want to be in it for the lengthy run."
IPO Marketplace in Shambles
Groupon's shaky long-term prospective customers are not the kind of news the IPO marketplace needs right now.The optimism in the spring - when 69 companies had gone manifeste by May 31 - all but evaporated over a tumultuous summer for stocks rocked by the financial debt ceiling debate in Washington and increasing concern more than the sovereign personal debt crisis in Europe.
"When volatility increases, it really is impossible for IPOs to get done," Kathy Shelton Smith, founder and principal of IPO research firm Renaissance Capital, told CNN Money. "You have to put a price tag on it and volatility makes investors shy away." In the previous two months just two organizations have had IPOs, Ubiquiti Networks Inc. (Nasdaq: UBNT) and Zeltiq Aesthetics (Nasdaq: ZLTQ), both in early October. According to Renaissance Capital, 215 organizations have filed the paperwork for an IPO, the most organizations waiting to go manifeste since 2001. Conditions are so poor that in the past two months at least 15 suppliers have withdrawn their IPO paperwork, giving up altogether.
Prices in Reverse
The subpar performance of plenty of of the businesses that went public earlier this calendar year has been just as discouraging as the volatile stock industry. Though there have been a few successes like LinkedIn, up 82% from its IPO value, Dunkin Brands Group (Nasdaq: DNKN), up 37%, and Zillow Inc. (Nasdaq: Z) up 62%, weak performers have dominated.
A great deal more than half of this year's IPOs are investing below their present price. Some of the bigger disappointments have been Pandora, which is investing just below its $16 offer you cost, Freescale Semiconductor Holdings (NYSE: FSL), down 30%, Solazyme Inc. (Nasdaq: SZYM), down 44% and Vanguard Health Systems Inc. (NYSE: VHS), down 49%. Other IPO candidates seeking at such grim performers are understandably reluctant to jump in. The IPO market eventually will perk up, but not until most of the issues disrupting stocks reach some sort of resolution. And that doesn't appear to be happening any time soon. "Market place turmoil ... can bring manifeste offerings to a rapid halt," writes Steve Schaefer of Forbes. "Rebuilding the confidence to launch suppliers onto public markets tends to take longer as investors need to get comfortable once yet again making bets on suppliers that may have limited track records."
On its first day of buying and selling, Groupon carried out superior than some expected, rising 30.55% to $26.eleven a reveal from its initial $20 for each reveal offer price tag. Few anticipate that pop to final, yet. And the sooner Groupon fades, the more discouraging it is going to be towards the dozens of suppliers seeking to go manifeste. "Not a person I've talked to, small or substantial, wants to hold it longer than a day," Scott Sweet, managing director of research site IPOBoutique.com, told MarketWatch. "They don't trust it.
Deserved or not, some of the investor mania for social media stocks - some of which went manifeste earlier this yr, like Linkedin Corporation (NYSE: LNKD) and Pandora Media (NYSE: P) and some of which are planning IPOs, like Facebook Inc. and Zynga Inc. - has rubbed off on Groupon. But Groupon's easily duplicated business model, fuzzy accounting practices and struggles to reach profitability have lots of experts questioning the daily-deal company's ability to survive, a lot less keep growing.
"I wouldn't touch it with a ten-foot pole," stated Money Morning Chief Investment Strategist Keith Fitz-Gerald. "This isn't a stock for an investor searching for a long-term play with stability." Furthermore, Groupon's IPO was structured to ensure the price tag spiked on launch. To keep demand artificially high, only 5.7% of the company, or 35 million shares, were floated. While in the neighborhood of other social media IPOs this yr such as LinkedIn (8.3%) and Pandora (9.2%), it is far below the 27% average IPO for tech businesses, not to mention the 40% average for all IPOs.
"The post-IPO investor will likely be taking a risk on this deal," Josef Schuster, founder of IPO research and investment house IPOX Schuster, told Reuters. "It is maybe an excellent trade for a day trader, in and out in a single day, but I don't want to be in it for the lengthy run."
IPO Marketplace in Shambles
Groupon's shaky long-term prospective customers are not the kind of news the IPO marketplace needs right now.The optimism in the spring - when 69 companies had gone manifeste by May 31 - all but evaporated over a tumultuous summer for stocks rocked by the financial debt ceiling debate in Washington and increasing concern more than the sovereign personal debt crisis in Europe.
"When volatility increases, it really is impossible for IPOs to get done," Kathy Shelton Smith, founder and principal of IPO research firm Renaissance Capital, told CNN Money. "You have to put a price tag on it and volatility makes investors shy away." In the previous two months just two organizations have had IPOs, Ubiquiti Networks Inc. (Nasdaq: UBNT) and Zeltiq Aesthetics (Nasdaq: ZLTQ), both in early October. According to Renaissance Capital, 215 organizations have filed the paperwork for an IPO, the most organizations waiting to go manifeste since 2001. Conditions are so poor that in the past two months at least 15 suppliers have withdrawn their IPO paperwork, giving up altogether.
Prices in Reverse
The subpar performance of plenty of of the businesses that went public earlier this calendar year has been just as discouraging as the volatile stock industry. Though there have been a few successes like LinkedIn, up 82% from its IPO value, Dunkin Brands Group (Nasdaq: DNKN), up 37%, and Zillow Inc. (Nasdaq: Z) up 62%, weak performers have dominated.
A great deal more than half of this year's IPOs are investing below their present price. Some of the bigger disappointments have been Pandora, which is investing just below its $16 offer you cost, Freescale Semiconductor Holdings (NYSE: FSL), down 30%, Solazyme Inc. (Nasdaq: SZYM), down 44% and Vanguard Health Systems Inc. (NYSE: VHS), down 49%. Other IPO candidates seeking at such grim performers are understandably reluctant to jump in. The IPO market eventually will perk up, but not until most of the issues disrupting stocks reach some sort of resolution. And that doesn't appear to be happening any time soon. "Market place turmoil ... can bring manifeste offerings to a rapid halt," writes Steve Schaefer of Forbes. "Rebuilding the confidence to launch suppliers onto public markets tends to take longer as investors need to get comfortable once yet again making bets on suppliers that may have limited track records."
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