Thursday, September 15, 2011

The gloom about tech IPOs

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               Tech startups hoping to find an exit strategy in the public stock market might reconsider. First, market turbulence and the prospect of a double-dip recession led the likes of Zynga and Groupon to consider delaying their debuts. Now it seems 2011 is proving to be not just an unkind year for IPOs in general. It's especially unkind to tech.

Tableau Software, a Seattle-based data-analytics software company, looked at 24 technology IPOs that have listed on U.S. exchanges so far in 2011 and found that, as a group, they are significantly underperforming other sectors. Tech IPOs are on average trading 11.5% below their offering prices, while compared with a 5% decline in business and financial services IPOs, a 7% decline in real estate IPOs and a 8% decline in industrial and consumer product IPOs.

Many IPOs are down from their offering prices because most went public in the first half of the year, before a summer swoon brought nearly all stock prices down (since mid-July, the S&P 500 Index has dropped 14%). But even so, tech IPOs are being hit especially hard. Only IPOs in the energy industry, which are down an aggregate 12% from their offering prices, have performed more poorly than tech.


Only a third of the 24 tech IPOs Tableau tracked closed Monday above their offering prices, led by social network LinkedIn (LNKD), up 84%; business-software maker ServiceSource International (SREV), up 61%; and web-security company Qihoo 360 Technology (QIHU), up 49%. Those gains are comparable to the better performing IPOs in other industries: CVR Partners (UAN), a fertilizer company, is up 55% and cancer-drug developer Endocyte (ECYT) is up 80%.

But viewed from a different angle, tech performance isn't so stellar. LinkedIn and Qihoo saw their stock prices double on their first day of trading. LinkedIn is down 12% from its first-day closing price and Qihoo is down 37%. So many of the gains that were fleetingly available on the hottest tech IPOs evaporated quickly.Click here to visit the site

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