LinkedIn, Groupon, Zynga, Yelp, and now Facebook have all gone public. At this point in time, with the exception of LinkedIn, the sector’s stock performance has been horrible. If we compare the stock price close as of today versus the stock price close on the day of each company’s IPO, the following percentages illustrate returns based on those prices:
Facebook -25%, Yelp -31%, Groupon -55%, Zynga -36%, LinkedIn 6%.
If we compare the peak stock price on the day of the IPO (first day pop before big investors dump on to retail investors) to the stock price close as of today, we have the following returns:
Facebook -56%, Yelp -52%, Groupon -164%, Zynga -89%, LinkedIn -23%.
Those insiders that cashed out significant holdings on the day of the IPO have made out quite well relative to the rest of the investors. And, as I have pointed out in my LinkedIn pieces the insiders have been dumping significant shares post-lockup period. I eagerly await to see what the insiders do at Facebook, Yelp, Groupon, and Zynga once their lockup periods expire. Will we see a mass exodus, or do the management teams and early investors that still hold significant stock positions believe this sector is a long-term play?
My position is that we will see lots of smoke and mirrors via acquisitions, mergers, and yet more media hype in an effort to keep this sector afloat long enough for the insiders to quietly get out in the next three months to a year. The Facebook flop even fooled the professionals orchestrating the creation of the bubble. Perhaps the retail investors on average have caught on to their Ponzi schemes. Unfortunately, lots of money has already been made by a select few of insiders connected to these companies and the game isn’t nearly over.