What Happens After the I.P.O.?
There have been about 2,400 technology, Internet and telecom I.P.O.’s since 1980. On the first day of trading, the average stock rose 32 percent above its
offer price. But in the three years after that, most companies had negative returns, according to statistics compiled by Jay Ritter, a professor of finance at the
University of Florida. Companies with higher values compared with their revenue before the I.P.O. have fared especially poorly.
$20 billion
HOW FACEBOOK COMPARES
PRICE-TO-SALES RATIO
$10 billion
$1 billion
2012
Facebook
40x
10x
5x
Circles are sized by value at the end
of the first trading day, in today’s dollars
At its offer price, Facebook’s market value is $tk billion, more
than four times that of Google at its I.P.O. in 2004. Facebook had
revenue of about 4 billion in the last year, meaning it will have
one of the higher price-to-sales ratios, especially outside of the
dot-com bubble.
Colors show the ratio of the company’s value
to its revenue in the 12 months before the I.P.O.
Return three years after the I.P.O.: The decliners …
1999
WebVan
–100%
344 companies
634 companies
1999
eToys
–100%
256 companies
2011
Groupon
–61%
1999
Drugstore.com
–95%
2000
Corvis
–98%
–40 to –60%
–60 to –80%
–80 to –100%
2011
Yandex
–44%
2011
Pandora
–48%
2007
MetroPCS
–73%
1999
Red Hat
–81%
1999
Akamai
–99%
1999
MP3.COM
–92%
1999
Infonet
–92%
THE DOT-COM BUST
–20 to –40%
0 to –20%
197 companies
158 companies
Many of the biggest declines
over three years were for
companies that went public —
often with little or no revenue
— in 1999 or 2000. Companies that went public in those
two years are outlined with
grey stroke.
a
2000
Pets.com
–99%
1999
Priceline.com
–92%
2002
PayPal
–0%
1995
Netscape
–14%
1980
Apple
–25%
2011
Zynga
–16%
2012
Yelp
–15%
… and the gainers.
0 to +50%
+50% to +100%
+100% to +200%
+200 to +300%
286 companies
175 companies
157 companies
71 companies
115 companies
1993
Gateway 2000
+217%
1986
Sun
Microsystems
+118%
1998
GeoCities
+164%
2011
Zillow
+21%
+300% or more
2004
Google
+398%
2002
Netflix
+86%
2003
Orbitz
+10%
2011
LinkedIn
+19%
2000
Garmin
+169%
1997
Amazon.com
+2,763%
1995
Pixar
+25%
1996
Yahoo
+3,590%
1998
eBay
+492%
Over the Long Haul
Performance after three years, however, is not necessarily indicative of a company’s future. Yahoo skyrocketed only to plummet, while Apple took decades to rise.
A look at how Facebook’s current market value and revenue compare to five other notable technology I.P.O.’s.
Yahoo (1996 I.P.O.)
eBay (1998)
Google (2004)
Microsoft (1986)
Apple (1980)
Valued above $125 billion
in early 2000, Yahoo was
worth one-tenth that
amount two years later.
In 2004, eBay had
sales and value similar
to Facebook now.
Sales have nearly
quadrupled since, but
its value has fallen.
Google currently has a
price-to-sales ratio
around 5. But in June
2005, it had values
similar to Facebook’s
current levels.
Although Microsoft's revenue
has increased most years, its
stock price has been relatively
flat since it fell in 2000.
Three years after its I.P.O., investors in Apple had lost 25
percent. But nearly three decades later in May 2010, it
surpassed Microsoft in market capitalization and it is now the
largest company by market capitalization.
ales ratio
Q4 1999
sr
ati
o
Q1 2012
e-t
pri
c
es
tim
300
10
Q4 2007
40 times
400
io
at
sr
o -s
price-to-s
$500
ale
Market value,
in billions
5
es
tim
ice
pr
ale
s
o-
-t
Q1 2011
Q4 2007
200
Q4 2007
Facebook
100
Q2 2005
Q1 2000
0
0
25
0
25
0
25
50
0
25
50
75
0
25
50
75
100
125
Annual revenue, in billions
Sources: Jay Ritter, University of Florida; Compustat; Bloomberg
Note: Returns through Monday are shown for companies with I.P.O.’s in May 2009 or later.
AMANDA COX AND SETH W. FEASTER/THE NEW YORK TIMES
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