3 Companies That Struggled After Their IPO
With Uber’s poor start to public life taking its toll on the drive-sharing giant, let’s take a look at 3 other companies that had difficult starts after going public.
In its early days, Facebook (NASDAQ: FB) and its founder Mark Zuckerberg was famous for resisting both buyouts, so it’s hard to believe that one of the world’s largest companies faced such a struggle after it filed for an IPO.
Many would describe Facebook’s IPO in February 2012 as a disaster. Nasdaq informed traders that Facebook would launch at 11 am, but actually started trading 30 minutes later than this, with 80 million shares changing hands in the first 30 seconds. Then complaints came flooding through from traders who either paid higher than expected prices or had incomplete orders. Nasdaq later put this down to a “technical error”.
Many orders were also delayed, adding to the confusion from traders who were unsure how much it had bought or if the sale had gone through. In a separate incident at the time, a group of Facebook shareholders also filed a suit against the company for alleged “withholding of information” in relation to the company’s financial position.
With an IPO of $38 per share on the first day, Facebook’s valuation fell to its lowest ever price of $17.55 in that first year. The company did not recover its IPO for over a year. How then did Facebook and Zuckerberg turn it around?
Mobile usage played a big part, as Facebook now create enormous amounts of revenue via mobile advertising, allowing them to acquire mobile-based apps such as Instagram and Whatsapp. Facebook’s stock has multiplied close to tenfold since its lows, and although it still has many issues, there is no denying its place at the top table of the world’s tech industry.
In early 2017, Snapchat parent company, Snap Inc. (NYSE: SNAP) was preparing for its IPO, with CEO Evan Spiegel being touted as “the next Gates or Zuckerberg”.
Fast forward a year to September 2018 and the company’s stock had fallen more than 50% from its IPO price of $17 and Spiegel was not receiving the same fawning reviews that he once did. The losses were mounting, growth had slowed and money had been lost on an ill-fated rebranding and the gimmicky Spectacles line. With Spiegel still not being held accountable, and stock plummeting, investors were asking what was going on at Snap Inc?
By December 2018, many were looking for Spiegel to step down as the company seemed like a sinking-ship with an incompetent captain, as Snap’s stock price reached an all-time low of $4.99.
Fast forward once more to July 12th 2019, and Snap Inc. had just closed at $15.61, within shooting distance of its IPO price and up 183% for the year. After maintaining its user base at the end of 2018, Snap has now seen its daily active users grow in two consecutive quarters. The company threw out its rebrand to satisfy its younger customers, making a clear statement of intent that it planned to focus on satisfying this influential demographic.
Another key factor in Snap’s comeback is its focus on augmented reality, which Snapchat pioneered through its AR Lenses. This has proven very popular among teens, which has prompted advertisers to use more Snap Inc. products such as Snap Select.
Although Snap is still losing hundreds of millions in research and development spending, this may well be paying off as it is on the rise. When it comes to winning over the youth demographic, it seems to have cracked the code, which may well be its saving grace.
King Digital Entertainment
There was a time when King looked set to become the face of the ever-growing mobile video gaming industry. Its flagship product, Candy Crush, was sweeping the globe as a highly addictive, and simple gaming phenomenon.
In March 2014, after months of speculation, the company finally went public, and under the guidance of CEO Ricardo Zacconi, the company filed for an IPO of $22.50 per share, valuing the company at over $7 billion. However, hours later, investors seemed to lose their sweet tooth, as the stock price fell to $19 by the end of the day in a drop of almost 16%. Much of the company’s offering was helped by the success of Candy Crush, but it had little else to show, ending its opening day as the years worst-performing initial offering.
King Digital never quite recovered from its opening day fiasco as Candy Crush continued to generate over half of its revenue stream and few other innovations. In November 2015, just 20 months after its IPO, Activision Blizzard (NASDAQ: ATVI) acquired King for $5.9 billion.
As part of a large workforce reduction by Activision in early 2019, much of King’s assets were shuttered, including its Z2Live mobile studio in Seattle.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Facebook, Snap Inc. and Activision Blizzard. Read our full disclosure policy here.