) -- There are nearly 200 initial public offerings on tap for the year ahead, but most people will hear only about a small fraction, and even most of those may be overshadowed by headlines about
According to a recent survey of U.S. transaction attorneys conducted by
KCSA Strategic Communications
, it's going to be "another turbulent year for the U.S. IPO market." Respondents included 50 securities attorneys whose firms advised on 70% of the IPOs listed on major U.S. exchanges last year.
According to the results, 92% think the year's IPO market will be "relatively flat" when compared with 2011.
"Flat" is also how some might have described the most-talked about IPOs that hit the market in 2011,
( ZIP) and
among them. Many have been described as "disappointing" if not as outright duds by investors who failed to break the bank from Day 1. It often seems as though the hottest IPOs are the ones losing their sizzle the quickest.
Andy Rachleff, president and CEO of Palo Alto, Calif.-based
-- an online, SEC-registered investment adviser -- cautions that when it comes to IPOs there is an important distinction between "hype" and "buzz," with the latter being more about chatter than analysis.
"No one was saying that Groupon was the world's greatest company," says Rachleff, a co-founder of venture capital firm
who teaches courses on technology entrepreneurship at the Stanford Graduate School of Business. "I don't think people were saying you need to own the stock. But I think the more a company is discussed the more the average retail investor gets interested; the more they are interested, the more demand there is for an offering and the higher price it trades to initially."
Conversely, "there are really good companies that slide under the radar," enterprise-focused companies that don't engender much word of mouth among retail investors. Post-IPO value creation is more important than out-of-the-gate performance, he says, adding that investors' thirst for quick returns can obscure the true value of a company.
Rachleff presents the scenario of a consumer Internet company that goes public with a valuation of $2 billion. At the same time, an enterprise software company with a $700 million valuation also launches an IPO. The first company gets widely discussed "because most people can relate to what it does." With the other, "most people don't really understand how it works, or what they do."
After going public, the larger company trades down 10% to 15% in Rachleff's example, to a value of $1.7 billion. The smaller company does "exceptionally well," maybe up to $1.2 billion. Even though many will see Company A as a failure and Company B as a success, simple scorekeeping doesn't tell the whole story. The "disappointing" company may have been actually priced right and "from that true value, it is going to go up or down."
"Unfortunately, focus is often on how much the stock goes down," Rachleff says. "People think, 'If it went down 30%, it must not be a good company.'"
"A great example is when
went public," he adds. "Everyone forgets that their IPO was considered unsuccessful because the stock didn't pop. That's because they priced the stock not to pop. It was priced appropriately. But the articles that were written at the time were about how unsuccessful and awful it was."
We took a look at 10 companies, past and present, where the buzz didn't quite match up with post-IPO reactions. Some of these companies still have the potential to win over investors. Others basically took the money and ran themselves into the ground, leaving head-shaking investors to lick their wounds:
The daily-deal giant is among those companies that left a bad taste among once hyped-up investors.
KCSA's survey found that among its pool of attorneys, 72% named Groupon as 2011's most anticipated IPO, while 85% called it the most overhyped.
Groupon's raised $700 million with a Nov. 4 initial offering priced at $20 a share.
The road to that IPO was far from smooth, however. Investors probably weren't thrilled at all to find out CEO Andrew Mason and other early investors cashed out about $1 billion of their shares before going public. Another red flag: The SEC challenged revenue claims, causing a delay in the offering and a change in the company's accounting procedures.
Thus far, Groupon investors have been underwhelmed, with many questioning its initial valuation and whether it truly has growth potential. Its stock price, despite some hops and dips, has mostly hovered around its initial offering price.
There is no doubt the social media games offered by Zynga -- among them
Words with Friends
and the Facebook newsfeed-clogging
-- are addictive.
But is planting virtual tomatoes and plugging make-believe mobsters enough to base a billion-dollar company on?
Investors may not be so sure. Even though the 100 million shares it went public with in December made it one of the biggest IPOs since Google's in 1994, the stock's performance has been nothing to spam your Facebook friends about.
It launched at $10 a share, ticked up a few cents, then fell a few more. As of this week, it was still stuck below a ten-spot.
Long before the words "social" and "media" became conjoined, TheGlobe.com used the concept of user-shared content to help fuel the heyday of the dotcom era.
In 1998, the 3-year-old online community traded in on its tech world cache and assumed upside and went public.
All that's left of the company, the ghostly remains of its
, tells the tale of what happened next.
"On Nov.13, 1998, theglobe.com posted the largest first-day gain of any IPO in history up to that date, a 606% increase over the initial share price," it says. "The social media
aspect continued through the Internet craze of the late '90s, but with hopes of capturing advertising dollars it, like many Internet-based companies, suffered with the deterioration of the online advertising market."
In a last-ditch effort, company leadership opted to use theglobe.com as a vehicle to "make investments and acquire a portfolio of other Internet media and advertising companies." From the late 1990s until 2007, it expanded into a hodgepodge of businesses including an Internet-based phone service, a variety of gaming companies and marketing services.
In 2007, the company began to either shut down or sell off its various operations.
While TheGlobe.com failed in its efforts to revamp itself as a VoIP telephone service,
was among the companies that helped bring the technology mainstream. Its IPO offering, however, proved to be a hangup.
Just seven days after its 2006 public offering at $17 a share, the stock lost roughly 30% of its value.
It got worse from there.
The company had offered its customers the chance to buy shares of the IPO. Even though there was a delay in fulfilling those orders, investors were told they were stuck paying the $17 pricing, even though they stock had already dropped by $4 within just a day.
The lawsuits started almost immediately, including a class-action suit that led to investor restitution and roughly $800,000 in fines levied against the IPO's underwriters --
-- on the grounds that they failed to oversee the process properly.
Vonage did overcome those early setbacks to see steady gains in 2010 and 2011.
Webvan was one of those great dotcom-era ideas that was ahead of its time and beyond its financial capabilities.
Home grocery delivery is now common, thanks to companies such as
. But in 1997, Webvan's idea to create such a marketplace was revolutionary, especially with its goal of 30-minute delivery after an online order. It seemed to customers like a fantastic idea and to investors like a tremendous opportunity.
In 1999, the company's IPO raised $375 million, supplementing $1 billion from private investment firms. The money was badly needed to build the extensive network of trucks and distribution centers required for such an ambitious endeavor.
When all was said and done, the food delivery concept proved to be pie in the sky. Even with an influx of capital, the company was unable to perfect the delivery system it needed and it was actually losing money on all but the biggest orders -- a troubling trend, given the relatively small purchases of its typical city-living customers.
In 2001, a year and a half after going public, Webvan went out of business. It has since been absorbed by
This one went so wrong that the mascot outlived its company.
If the dotcom-era's burst bubble has a poster child, it is the Pets.com sock puppet, a roving (or is that Rover?) dog reporter who touted the benefits of online pet supplies in advertisements.
The little guy was popular, in a Spuds MacKenzie sort of way, and was immortalized by toys and even a balloon in the
Thanksgiving Day Parade.
In the final analysis, Pets.com was a great concept, poorly executed. Investors who held out hope were punished for their faith. The stock hit at $14 a share upon going public but fell to less than a quarter a share within just a few months.
The company went belly-up, but the famous puppy puppet? He still pops up from time to time in ads and media appearances.
If it existed in the 1990s, there was a Web company that thought it could sell it.
Just like the aforementioned pet food and groceries, toys would seem a logical niche product for an online marketplace. The 1999 IPO for eToys.com went off brilliantly. Starting at $20, it only took a day for shares to reach $76.
It wasn't all fun and games, though.
By 2001, the company, in freefall, declared bankruptcy and what remained of it was sold off to KB Toys, then owned by
, for just $5 million.
With KB Toys itself now shuttered, the eToys name lives on as an online presence run by owner
Toys 'R' Us
since early 2009.
It's a rare thing for a private equity firm to go public (if for no other reasons than the awkward phrasing). But that is exactly what
, a firm known for its hostile takeover acquisitions, did in 2007 when it tried to attract investors.
There may be a reason more firms of its kind don't go that route.
In June 2007, Blackstone -- one of the largest firms of its kind in the world -- sold a 12% stake in its ownership through an IPO and raised $4.1 billion.
Though certainly successful, investors who dreamed of becoming Wall Street royalty like founders Steve Schwarzman and Peter Peterson had a rude awakening in the form of that little setback known as the Great Recession. As the marketplace for free-flowing credit dried up almost instantly, Blackstone's leveraged buyout efforts suffered a setback. As a result, the stock, initially trading at $31 a share, plummeted to around $10 in a matter of months, a mark it has hovered around ever since.
The business-focused social media network was one of the most high-profile IPOs of 2011, and -- according to some -- one of the year's most disappointing.
Analysts had pegged the stock as capable of a 12-month price target of $85. It has seen revenue increase quarter-to-quarter (nearly $140 million during the period it went public) and a still exponentially growing member base. Its share price nearly doubled, from $45 a share, on its first day of trading.
Nevertheless, investors have groused that it may prove to be overpriced (it is trading, as of Jan. 23, near $74). Fueling those concerns was stock dumped as soon as its lockup period ended, a sell-off that benefited employees and institutional investors but at least temporarily has hurt individual investors by driving down shares.
The online radio company -- an increasing rival to satellite radio company
-- went public in June, selling 14.7 million shares at an initial offering price of $16. It ended the day up $1.42 a share, with a market value of roughly $2.8 billion.
It wasn't really a bad showing. But it hasn't really been a great deal since, either, which has fueled concerns that
business model may not yet offer the earnings potential to justify its valuation. As of Jan. 24, the stock had yet to move any higher than $13.18 since the year began.
-- Written by Joe Mont in Boston.
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