In our last post we wrote about how Groupon had managed to wipe off about $6 billion from it’s stock. That loss is now currently at $6.5 billion (On Monday it was $7 billion but Tuesday some small gains were made). Groupon (GRPN) is not the only one in trouble however. It is bookended by two other failing IPO’s – music discovery service Pandora and the lesser known Angie’s List (ANGI). Pandora’s stock closed at $10.52 yesterday, down 47.5% from a high of $20.04 on 1st July. Angie’s List stock closed at $11.80 yesterday, down 28% from a high of $16.26 at close of it’s first day only 8 days ago. Although neither two have bludgeoned the market cap quite like Groupon has, the trend is becoming more apparent.
Now that Groupon is public it is also going to have to be a little bit more open about its losses. It will have to file with the SEC a Form 10-Q quarterly & Form 10-K at the end of the fiscal year. This is going to offer a lot of insight for it’s competitors as well as for traders. Groupon has dug it’s grave quite nicely, but soon it will be time to pass the shovel-shaped baton and make room for the next questionable company eager to go public – Zynga.
Zynga has been in the news a lot lately whether it be for changes at the top or just generally being assholes. However, unlike Groupon they have reported making a profit of $121 million since 2010. But, just like Groupon their costs are huge if you consider that they made $828.9 million in the first 9 months of this year alone. Still, a profit’s a profit and in this modern era of ‘growth before profitability’ it’s a better sign than one could expect. As Zynga heads out on an IPO roadshow they will be fighting a war on both fronts – dispelling investor anxiety caused by Groupon & convincing talent within the company that they should stay after the company has gone public.
Zynga are going to be the ones to watch because the mothership that is Facebook will be looking to go public next year also. With an evaluation of over $100 billion ($10 billion in IPO) and Zynga being a major contributor to Facebook’s revenue there is a lot riding on their performance. Facebook certainly will not want to befall the same fate as IPOs of startup’s past. But you may be thinking, “But it’s Facebook, why wouldn’t i invest?” As compelling an argument as that is Debra Borchardt over at The Street warns of pitfalls belying the rookie traders. In short, if you’re going to buy on the first day then sell on the first day too otherwise you are better off waiting it out until the price drops. There is a clear rise and fall trend.
Facebook could be the company to quash rumours of ‘another bubble’ if it does well. But are the companies really the ones to blame? What on earth could have driven people to buy and hold onto Groupon shares after the 1st day? What if the majority of investors ignored the hype and looked at the facts and simply refused to buy? The price would not have soared so high and the losses would have been much smaller with less fingers burnt. I rarely give Groupon any credit but they did a great job of swindling billions of dollars out of people stupid enough to hand over the money. Something akin to robbing a bank with a banana.
If selling time shares on the Titanic is a real strategy then it’s a good time to own some stock in a startup. For eager beaver traders, maybe they’d be better off sending a million quid the KLF’s way. Lets face it, that would probably offer a better ROI!