Over the past several years, the IPO market has been, at best, hit or miss. The market's love affair with Facebook's IPO was just one recent example of how investors remain thirsty for instant gratification. While it's still too early to say definitively how Facebook will be looked upon down the road, the picture is much more clear for other recent IPOs. We're going to look at three companies that hit the social scene a couple of years ago with equal amounts of fanfare only to have investors realize that, as in any IPO, there are no guarantees of long-run success as a company or a stock.
Sad Songs for PandoraPandora ( P), which is the market leader in Internet radio streaming with more than 7% share of total radio listening, has been playing plenty of sad tunes lately. The company first went public on June 15, 2011. The stock opened at $20 per share and soared to its all-time high at $26 until it ended its first public session at $17.35. After its IPO, questions were raised regarding profitability. But why now? The company had not earned a profit in the 10 years prior to going public. It's as if the company's prospectus didn't matter and Pandora's business model was expected to suddenly change. But Pandora surprised the Street in the third quarter of 2011 with its first-ever profit -- earning $638,000. It wasn't a huge number. But for Pandora, it got the doubters off its back.
Essentially, over a period of six months (November 2012 to May 2013) Pandora was able to gain 173%. But as has been the dancing pattern since its IPO, the company is now taking a step backward, to put it mildly. The real question is, can Pandora survive now that both Apple ( AAPL) and Google ( GOOG) have entered the realm of Internet radio? I don't believe that it can. Investors realize that Pandora is now in a highly competitive landscape and trades in a market that is anything but forgiving. As exciting as Pandora's IPO might have been, the Street seems equally eager to move on to the next great idea. I still like Pandora, though. But I wouldn't dare touch it today with my own money.