IPOs - No guarantees

While there have been been many headline-grabbing IPO success stories, an IPO is not an automatic money-maker for investors

Consider these recent real-life IPOs :

(May 2012) 

Facebook (NASDAQ: FB) is the largest social media company in the world with over 845,000,000 users, how could it miss?

It set its IPO price at $38 a share, raising 16 BILLION dollars.  Despite some technical glitches, the stock quickly rises to $45 - an 18% return in just a couple hours!  However the excitement began to wear off, and by the end of the day, the stock was down to $38.23 - a profit of just 23 cents per share.  But more bad news was to follow.  The stock continued to fall, and 9 days later, was selling for just $27.72 per share - a loss of $10.28 per share, more than 25% of its value.

Zynga (December 2011)

Zynga (NASDAQ: ZNGA) develops online games like CityVille, FarmVille, CastleVille and Mafia Wars which reach hundreds of millions of users every month!  It is quickly on its way to being one of the fastest high-tech companies to earn over $1 BILLION dollars annually.  How can it miss?

Launching their IPO on December 16, 2011 at $10 per share, within hours it had dropped 12% in just three hours!  A brief rally brought the price back up to $9.00 by the end of the day.  Yet just 7 months later in July, 2012, Zynga was trading at just $3.00 a share - a 70% loss!


Will Zynga recover, will someone buy it out, or is it game over?  Time will tell.