2011 Tech IPOs In Review: From LinkedIn to Zynga

Company Name Ticker IPO Date Deal Size IPO Price Jan. 2 Close % Diff
Yandex N.V. YNDX 5/23/11 $1,304,000,000.00 25 19.7 -21%
Zynga ZNGA 12/15/11 $1,000,000,000.00 10 9.41 -6%
Freescale FSL 5/25/11 $783,000,000.00 18 12.65 -30%
RenRen RENN 5/4/11 $743,000,000.00 14 3.55 -75%
Groupon GRPN 11/4/11 $700,000,000.00 20 20.63 3%
LinkedIn LNKD 5/19/11 $352,000,000.00 45 63.01 40%
Pandora P 6/15/11 $234,000,000.00 16 10.01 -37%
HomeAway AWAY 6/29/11 $216,000,000.00 27 23.25 -14%
Demand Media DMD 1/25/11 $151,000,000.00 17 6.65 -61%
Angie's List ANGI 11/17/11 $130,000,000.00 13 16.01 23%

 

January 3, 2012 – 2011 was not a great year for IPOs. Domestically, 125 IPOs raised a total $36.3 billion in 2011 compared to $38.7 billion raised by 154 IPOs in 2010. Although total proceeds dipped only slightly (-6.2%), the number of private companies going public took a nosedive, falling over 18%. What does this mean? In general, fewer companies went public at higher valuations. Within the technology space, about the same number of companies went public, but at higher valuations than in 2010. 

In spite of a euro zone crisis, increasingly volatile stock markets, and a downgrade of the U.S. creditworthiness, tech IPO fundraising actually grew 85% from 2010, raising an impressive $6 billion in 2011. Interestingly enough, the number of tech IPOs remained relatively flat between 2010 and 2011. This means that more high profile, hyped tech companies are raising the bulk of the money. PrivCo, the private company financial data authority, has reviewed the top 10 tech IPOs by amount raised.

Here's what we found:

  • Groupon, LinkedIn, Zynga, and Freescale, 4 of the largest tech IPOs in US history (behind Google), raised a total $2.8 billion this year. This represents a whopping 40% of the total tech money raised by Initial Public Offerings in 2011.
  • Despite initially raising huge sums of money, 6 of the 10 tech IPOs are trading well below their offering price. Only two companies, LinkedIn and Angie’s List , are trading at a premium (+40% and +23% of offering prices, respectively).
  • 8 of the top 10 IPOs originated in the US; 4 of these companies are headquartered in California. Silicon Valley remains the center of tech optimism.
  • Market volatility has particularly impacted tech IPOs as investor confidence wanes due to shoddy economic conditions. To add to macroeconomic uncertainty, many technology companies have yet to monetize their growing user bases.
  • Demand Media and Angie’s List round out the top 10, raising a combined $280 million. Even though Angie’s List raised just 1/10th of the money Groupon raised, it presently trades at 23% above its IPO price. Groupon trades at -21%. 2011 showed us that the size of an IPO does not indicate a company's financial strength.

See PrivCo's Full Financial Report on Zynga

See PrivCo's Full Financial Report on Groupon

The disappointing performance of IPO’d tech companies can be attributed to the poor quality of their business models. Upon filing to go public, fledgling companies reveal sometimes less than ideal internal management and financial information. Shady accounting practices, internal management scuffles, and valuation based on far-fetched monetization assumptions leave once optimistic investors wanting more. This could not be truer for the two highest grossing IPOs of 2011: Zynga (See PrivCo’s Report on Zynga’s IPO) and Groupon. 

As 2012 rolls forward and its much anticipated IPO approaches, Facebook will have Zynga’s and Groupon’s mistakes in mind. It’s important to remember being private is not necessarily a bad thing.

Need a model IPO candidate? SEE PRIVCO’S FULL ANALYSIS ON PALO ALTO NETWORKS