Busted IPO defined: A Busted IPO occurs when a company?s stock price closes below its offering price on the day of its initial public offering.
Generally, a tech company’s stock price will ‘pop’ or jump up a substantial percentage during its first day of trading. Investment banks take various measures to construct IPOs so that they ‘pop’ to earn money for themselves and their clients. However, this was not the case for Zynga, a tech company, whose stock price dropped 5% on its first day of trading. Certain factors can have an effect on whether a company’s stock price pops or if the IPO is considered a bust. Read PrivCo’s Analysis on Why Zynga Was Considered a Busted IPO
Above is a definition for “Busted IPO” from PrivCo’s Private Company Knowledge Bank, the definitive online and e-book guide to private companies and private company deals.
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