Groupon, Facebook Lead 8 Most Disappointing Recent IPOs

Aug. 22, 2012 — -- intro:

With shares of Groupon (GRPN) and Facebook (FB) hitting all-time lows in recent days, it may be easy to criticize the companies' high valuations. But the two firms have plenty of company in the IPO world. Many companies' stock prices struggle in the year following an IPO.

But it's more than possible for those companies to make a comeback -- eventually. Jim Krapfel, IPO analyst with investment firm Morningstar, points to a handful of them, including Spirit Airlines (SAVE) and Carlyle Group (CG).

Discount airline Spirit went public on May 26, 2011, at $12 a share. Shares closed at a disappointing $11.55 that day. A year and change later (midday Wednesday, Aug. 22, 2012) shares were trading at $19.81.

Carlyle Group had a IPO price of $22 when it went public in May. It was trading at $24.87 midday on Wednesday.

But before the latest companies that had IPOs can make a big comeback, here is Krapfel's list for eight recent investor disappointments.

quicklist:category: IPO date: Nov. 4, 2011title: Groupon (GRPN)media: 17052753text:

Shares of Groupon, based in Chicago, closed at record low of $4.54 on Tuesday night after Barclays bank downgraded the company to "underweight" due to slow growth. Its IPO was priced at $20 when it went public in November of last year. Its 52-week high is $31.14.

quicklist:category: IPO date: Dec. 16, 2011title: Zynga (ZNGA)media: 17052834text:

Shares of social-gaming company Zynga, based in San Francisco, have fallen about 70 percent since it went public last December. It was then priced at $10 and the stock closed down, at $9.50, on its first day of trading. Most of the company's popular games played online, like FarmVille, are free, though a smaller number of fans pay small fees for virtual goods.

In July, the company reported lower revenue from their second quarter than expected with $332 million, below the anticipated $343 million.

The company traded at $3.15 on Wednesday midday, up 6.2 percent from the day before. It has a 52-week high of $15.91.

quicklist:category: IPO date: May 18, 2012title: Facebook (FB)media: 16403905text:

Shares of Facebook have dropped about 50 percent since debuting as a public company on Nasdaq on May 18. Priced at $38 for its IPO, shares traded around $19.23 on Wednesday midday.

Last Thursday, the first "lockup" expired, allowing early investors to sell their shares. That day, shares closed down over 6 percent to $19.87, a new low at the time. On Monday, regulatory filings showed that Peter Thiel, Facebook's first big investor, sold most of his holdings while he remains a board member. On Tuesday, shares fell again 4.3 percent to $19.16.

quicklist:category: IPO date: July 27, 2011title: Teavana (TEA)media: 17052979text:

Shares of tea retailer Teavana surged 64 perent on its first day of trading, July 27, 2011. The stock closed at $27.80, rising from its IPO price of $17. Teavana's goal is to be the "heaven of tea," selling premium tea and related products. Its stock has failed to reach such heights. Shares closed at $11.79 on Tuesday and were trading under $11.63 on Wednesday, down about 1 percent.

The company, based in Atlanta, has opened over 200 stores in the U.S. and Mexico since it launched in 1997.

quicklist:category: IPO date: May 11, 2011 title: FriendFinder (FFN)media: 17053033text:

Given the unfortunate title of "worst U.S. debut of the year," according to the Wall Street Journal, dating and sex partner website, FriendFinder Networks Inc. was priced at $10 but closed at $7.85, down 22 percent, on its first day of trading, May 11, 2011.

It continued to fall, and in the last 52 weeks its high was $3.30. Midday Wednesday FriendFinder's stock was trading at 90 cents a share.

quicklist:category: IPO date: March 29, 2012 title: Millennial Media (MM)media: 17052903text:

Mobile advertising firm Millennial Media, based in Baltimore, had an IPO price of $13 a share and closed up on its first day of trading on March 29 of this year, to $25.

The firm is one of the largest remaining independent mobile ad networks, according to TechCrunch, with 350 million monthly unique users as of June 30.

"Although revenue growth has continued at a torrid pace, the company has not achieved a significant degree of operating leverage in its first couple of earnings reports post-IPO, which has resulted in a material contraction to its multiple and stock price," Morningstar's Krapfel said. "Concerns regarding limited monetization capabilities on mobile devices and the threat of large clients developing in-house solutions has also weighed on the shares."

Earlier this month, the company reported a second quarter loss of $2.2 million, compared with a loss of $152,000 in the same period a year ago, due to its growing expenses.

As of Wednesday midday, the stock was trading at $11 a share, down 2.65 percent.

quicklist:category: IPO date: March 29, 2012title: Rexnord (RXN)text:

Industrial manufacturer Rexnord priced its IPO at $18 on March 29, and shares closed up 11 percent to $20. Based in Milwaukee, the company has seen a drop in its stock price since reporting a loss of $2.2 million earlier this month for its first quarter.

Krapfel said Rexnord "learned a lesson in setting analysts' expectations."

After it lowered its guidance following second quarter results, citing a slower economic environment, shares fell 19 percent and now trade well below its IPO price.

Shares were trading around $15.31, down 1.35 percent midday Wednesday.

quicklist:category: IPO Date: Oct. 14, 2011title: Ubiquiti (UBNT)media: text:

Broadband wireless solutions company Ubiquiti, based in San Jose, Calif., debuted with an IPO price of $15 last October. Shares closed up 16.7 percent that day, at $17.50.

Despite reporting increased fourth quarter earnings earlier this month, up 57 percent to $28.5 million, investors have been dismayed at its weak future outlook, in part because of counterfeit goods. Midday Wednesday, the stock was at $8.93.