It was the stock market story of the summer: how would Facebook’s initial public offering fair?
Everybody was watching Zuckerberg and his social media powerhouse to see what would happen. When Facebook announced that IPO would be $38 a share, everybody – from personal finance bloggers to traders to Facebook members – chuckled… and held their collective breath. Was the eight-year-old company really ready for such a massive leap into the stock market? Did it have what it took to be a successful publicly-traded company?
It didn’t take us long to learn the answer – a resounding “No.”
But while everyone was watching Facebook, another web-based business that had also broken new ground – basically defining its industry – had also started to tank.
So why didn’t anybody notice Groupon was floundering until now?
A Tale of Two Stocks
Facebook made its IPO on May 18, 2012. By the end of the day, the stock was already trading below the $38 mark; it has yet to top that amount in any trading day since.
Only six and a half months earlier, Groupon made its IPO. At the time, the $700 million valuation – 35 million shares at $20 each – was the biggest IPO for a web-based business since Google’s $1.7 billion IPO in 2004. By the time Facebook entered the market in mid-May, Groupon’s stock was already trading well below its IPO mark; on May 18th, Groupon (GRPN) closed at 11.58 – a scant 58% of its debut price.
Since then, both stocks have shared a similar trajectory. By Labor Day, Facebook (FB) was trading below $18 a share; Groupon was flirting with the $4 mark. Yet, as everyone from Mark Cuban to Forbes Magazine has blasted Mark Zuckerberg for the Facebook debacle, leading many to speculate over how long the Harvard dropout can maintain his place as Facebook CEO, by comparison there have been few news reports of investors calling for Groupon CEO Andrew Mason’s head on a proverbial golden platter.
So What Happened?
Here we have two tech stocks, both offering their IPOs on NASDAQ within just over six months of one another. Both have tanked to just a fraction of that initial value – so what’s going on? What happened?
The folks at Facebook claim it was simply an overvaluation; they also blame the site’s inability to grasp the mobile market when it comes to advertisers. Groupon says it didn’t expand aggressively enough internationally, and – quote – “stupid risks.”
Is there a larger lesson to be learned here, though? About businesses going public too early, or about determining a company’s worth based on intangibles? How can you value a company when it doesn’t really sell a product, or only works as a middle man between providers and consumers?
Readers, what do you make of these stock quotes and their downward trajectories? Are they two of a kind – or two completely different situations?