5 IPOs You Are Glad You Avoided
We’ve looked at IPOs a lot in recent times and seen that there were some incredibly successful ones we wish we had taken part in. With the benefit of hindsight, some of these IPOs were simply licenses to print huge amounts of money as the stock rose and rose and then kept on rising.
However, what about the other ones? That’s right, I am talking about the crushingly disappointing IPOs that you should be glad you avoided? Here are 5 of the most memorably bad IPO failures in recent times.
Maybe you remember the spectacular failure that was the Pets.com IPO. You certainly would if you had lost a whole heap of money on it. This was an online pet store that was born during the late 1990s internet boom and it was a huge success for a while. The IPO then happened in 2000 and raised $82 million but things started to go quickly downhill after that. The firm’s stock reached a high of $14 per share but soon plummeted to just 22 cents. The whole thing went down the drain nine months after the IPO.
Another internet success story turned to bitter failure, The Globe.com was one of the first social media sites to really catch the public’s imagination. The IPO was in 1998 and shares initially shot up from $9 to an impressive $65 in the very first day of trading, which was a gain of over 600%. This was the best first day trading for any IPO up to that date. Sadly, the dot-com implosion was just around the corner. The next year the price had plummeted and by 2000 the writing was on the wall.
In 2006 the internet telephony firm Vonage was a big deal. However, under the surface it was losing money and getting sucked into a very tough battle for its market share against many new competitors. The IPO which was launched in 2006 made $531 million, with each share priced at $17. One of the big problems that caused it be a disaster later came down to a technical hitch that made Vonage customers think that they had been unable to buy those $17 shares online. It was only after the price had sunk by over 30% in the first week that they were told that their share deals had gone through after all. The subsequent share-holder lawsuits helped send the company’s value spiraling down further.
While we have looked a lot at the dot-com bubble and the disastrous results its collapse brought for many investors, a bad IPO can happen in any industry. For example, the biodiesel refining company Mission NewEnergy as another that turned bad quickly. In 2011 their IPO made $25 million with shares at $9 each. Year on year losses saw the initial investors lose nearly all of their investment fairly quickly. Shares in the Australian energy company are currently sitting at $0.14 AUD.
We are back to the internet again for the spectacular eToys.com IPO failure. This online toy seller had expected to revolutionize the way we buy gifts for our kids and for a while it looked as though they might do exactly that. The IPO took place in 1990 and each share cost $20. This initially looked like a great deal, as the price rocketed to $76 in short time. Unfortunately, things started to unravel when they failed to deliver a lot of toys on time that Christmas and problems with their infrastructure became evident. The price of the stock kept on falling and by 2001 eToys had filed for bankruptcy.
As we can see then, not all IPO’s are destined for success.
Have you ever bought into an IPO you wish you hadn’t with hindsight?