companies, once hailed by their Silicon Valley boosters as
world-changing businesses with limitless potential, are instead proving a
sobering reminder of how investors can be seduced by Internet hype.
With a few exceptions, the
first wave of social media firms to trade on the public markets has
delivered a disastrous performance that conjures memories of the dot-com
bust of 2000.
publisher Zynga, which went public in December at a valuation of $7
billion, is trading around $3.15 a share, more than 68 percent off its
$10 IPO price.
Daily deals site
Groupon, touted as the firm that could reinvent local commerce, has
fallen from its $20 IPO price to about $7.15 in nearly nine months.
Music service Pandora Media has dropped from $16 at its June 2011 IPO to
around $10 on Friday.
And on Thursday, the 800-pound gorilla of the
group, Facebook Inc, reported tepid results that shaved some $10 billion
off the company's market cap. The stock has gone straight down since
its botched May initial public offering and now trades over a third
below its $38 IPO price.
the private equity guys at the early stages, already cashed out and made
their fortunes," said Peter Schiff, chief executive of Euro Pacific
Capital. "Everybody else who ran to buy the stock at the IPO at a
sky-high valuation ended up holding the bag."
"A lot of these companies are going to make a quick buck and flame out," he added. "Just look at 10 years ago."
an investor had sunk $1,000 into any of the four erstwhile dotcom
darlings, he would have anywhere from $317.50 to $706.45 left over. That
same wad of cash in LinkedIn would have more than doubled, to about
But many VC firms -- such
as early Facebook backer Accel Partners -- made a killing on the IPOs by
getting in the door first. Early backers in Pandora, for instance, may
have picked up shares in the firm for as little as around 50 cents