This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

In the Year of Facebook, Beware the Social Media Stocks

Stocks in this article: GRPN LNKD P Z ZNGA ANGI YOKU

NEW YORK ( TheStreet) -- Most believe the stock/business story of 2012 is going to be Facebook -- specifically its rumored IPO which should come before the middle of the year. That's probably true. Yet, ironically, 2012 is also the year in which you need to protect yourself from other falling social media IPOs.

There have been a number of social media IPOs in the last year. With each new one, we get a five-minute segment on CNBC or Bloomberg TV debating whether there is a new Web bubble.

If the question "is this a new bubble?" is really "are all these new social media IPOs currently overvalued and set to drop pretty dramatically?" then I think the answer is yes and we're likely to see it occur in 2012.

The "other" social media IPOs that are bound to come under selling pressure in 2012 include: Groupon (GRPN), LinkedIn (LNKD), Pandora (P), Zillow (Z), Zynga (ZNGA) and Angie's List (ANGI).

Even though Facebook will continue to fascinate investors and media pundits as its IPO date draws closer, here are five reasons why other social media stocks are bound to falter in 2012:

1. They will become much more liquid in 2012 as their lock-ups end. These stocks all sold a smaller amount of equity in their IPOs (5% in the case of LinkedIn). They hoped to get their stock price up and anchored in the minds of investors which would help keep it there once the companies got the chance to really sell stock. For most of these companies, the chance to unload shares starts six months after their IPO. However, sometimes -- as was the case with LinkedIn recently -- a company that agrees to do a secondary offering of new equity after the IPO lock-up will agree that insiders will wait for an additional period before they can start to sell more of their shares. But, no matter what, there starts to appear a lot more of the company's equity on the market starting six months or so after an IPO. When this occurs, the stock price typically gets pulled back to earth.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs