How Will Facebook Stock Market Venture Compare To Other Tech IPOs?

Whether it makes its IPO debut on Friday or not, it’s been almost impossible to escape the hype and noise surrounding Facebook’s latest venture. The tech world hasn’t seen an IPO this anticipated since Google back in 2004, and while there are a few similarities regarding the buildup to Friday, it’s hard to tell how this venture will pan out for Facebook in the long-term. That’s not even considering how the current financial markets are performing.

Numerous other tech and web companies have launched IPOs in the past so with that in mind, here’s a brief summary of the bigger IPOs in recent history. While the conditions and atmosphere surrounding these IPO is different in comparison to Facebook, it could provide some hints as to how Facebook’s stock – expected to trade under the stock ticker FB – will perform.

Google

Founded: 1998
IPO Date: May 2004
Ticker Symbol: GOOG

Pretty much everyone knows the deal with Google and the buildup to its IPO eight years ago was remarkably similar to Facebook’s. Both are hot properties in the tech world, both were heavily anticipated (relative to their time) and both have changed how people use and view the web.

Google ended up experiencing its greatest revenue growth rate prior to the IPO, something that hasn’t been proven just yet with Facebook’s new advertising structure. The stock was priced at $85, opened at $100 and closed at $100.34 on the day of its IPO. The sale of $1.67 billion gave Google a valuation of more than $23 billion By the end of the year, Google closed at $194 giving those who invested during the IPO a healthy increase in funds.

How It’s Faring Now

LinkedIn

Founded: March 2003
IPO Date May 2011
Ticker Symbol: LNKD

With over 90 million members in over 200 different countries, LinkedIn has a dedicated professional network and therefore has a loyal and regular user base. Having a net profit of $15.4 million at the end of 2010, the professional social networking site, opened at $45 and ended the day trading at $94.25, a 109 per cent increase. By the end of the day, LinkedIn was worth $8.9 billion. Not bad for a company that was valued at $3 billion and had priced shares between $32 and $35 a piece less than a month.

How It’s Faring Now

Groupon

Founded: Nov 2008
IPO Date Nov 2011
Ticker Symbol: GRPN

After turning down a $6 billion acquisition offer from Google, the daily coupon website was experiencing quarterly growth of 111 per cent at the end of 2010. This then plummeted down to 10 per cent by Q3 in 2011 and a number of problems involving corporate decisions and their CEO Andrew Mason who eccentric image had people worried that he would be ripped apart during the company’s roadshow.

Groupon raised $700 million after it set its strike price at $20 when it first started trading in November 2011. This gave the company a value of $12.7 billion and made it the largest technology company to go public since Google.

However, the company is struggling to rebuild investor confidence after dropping 51 per cent since its IPO and is now valued at just over $6 billion. It’s hoped that the company’s Q1 earnings report will show an 80 per cent jump in sales to $530.8 million and show that profitability is improving so that investor confidence is restored.

How It’s Faring Now

After a promising start, shares for the company has fallen down to $13 with the price steadily dropping after February after experiencing peaks and troughs before that. Groupon’s current performance is impacting its share price and it looks unlikely this will change in the short-term.

Zynga

Founded: July 2007
IPO Date: Dec 2011
Ticker Symbol: ZNGA

With deep ties to Facebook, the social gaming company has enjoyed huge success with its ‘-ville’ series and Words With Friends, Zynga jumped at the chance of floating on the stock market back in December and raised about $1 billion from the share sale.

However, while most companies experience an increase in share price on the first day of trading, Zynga’s shares, priced at $10, rose by 11 per cent initially before closing out the day at $9.45. However, the company is profitable in comparison to other IPO like Groupon who had great results in the first day of trading, but is now trading well below those prices.

How It’s Faring Now

The company is currently trading at $8 per share which, while by no means catastrophic considering its original trading price, isn’t encouraging since it’s been a steady drop since February.

Yahoo!

Founded: March 1995
IPO Date: April 1996
Stock Ticker: YHOO

Like the majority of tech IPO’s, Yahoo!’s venture started with a bank with an opening price of $24.50 before hitting a high of $43 and closing at $33. At the time, it was the brand associated with Yahoo! which was the major draw for investors, ensuring that the stock performed well and brought in $32.5 million from the IPO.

In recent years, Yahoo! has been underperforming and has lost a significant share of the search engine market. A number of high profile slip ups in recent times hasn’t helped its case either.

How It’s Faring Now

Yahoo!’s stock has been steady but the company’s allure and brand strength has been greatly diminished in recent times. The company is currently trading at $15 with no real sign of its fortunes changing.

eBay

Founded: Sep 1995
IPO Date: Sep 1998
Stock Ticker: EBAY

Before being acquired by Paypal in 2002 for $1.5 billion, eBay had a similar performance to Yahoo! in which it closed its first day of public trading with a 163 per cent increase in share price. Starting off at $18 a share, the company closed with its shares being valued at $47. Through the IPO, eBay raised $63 million with the market cap nearly hitting $1.9 billion.

How It’s Faring Now

Currently trading at $39 after a steady increase since the start of this year. eBay’s stock shows no signs of decreasing any time in the near future, unless a crash occurs.

So How Will Facebook Perform?

Firstly, it’s important to note that even if the IPO never went ahead, Facebook is performing well on its own. The company makes a significant net profit from advertising, which makes up 80 per cent of its revenue. The problems faced by companies like Groupon and LinkedIn was that there was no sustainable business plan in place.

Facebook’s advertising methods, their recently declared intent of improving the mobile experience (one that is badly needed) and 900 million users could be enough to convince regular investors and traders that this is a company worth investing in. Current market conditions could play a part in how well its stock performs, but it’s likely that the hype and goodwill that surrounds this IPO will be enough to cover for this.

Of course, future revenue will be dependent upon how well advertisers adapt to the company’s new advertising features and whether it will provide them with a significant return in the long-term. General Motors got a lot of attention when it announced that it will be pulling all advertising from Facebook, but so far it seems like an isolated case and so far, no other major company has voiced similar concerns.

With shares expected to trade at around $34 to $38, chances are Facebook will experience a first day with their share prices doubling at some point that day. However, while its short-term success on the stock market is all but guaranteed, Facebook needs to make sure its long-term strategy is rock solid to ensure that the next few years will be similar to Google instead of becoming a Groupon or Yahoo!. Current trends suggest that it will be the following, but Facebook will do well to remember that a lot can happen in a short space of time.