An IPO or a “Initial Public Offering” is a public offering where stocks in the stock market trade are sold to the public for the very first time by the associating company. By doing so, the company or firm metamorphosises from a private one to a general public one. In most of the cases, a company chooses to do so to build capital in order to swathe in more profits under its hold. For example, a successful IPO – like that of the world renowned Google – incorporates millions or sometimes even billions of dollars which is subsequently utilised to further expand the company down the line and push up on the profits. However it is to be noted that simply launching an IPO is not the benchmark of guaranteed success. A litany of companies have gone public inspite of failing to be assessed as profitable, having carved out business models that seemed unsustainable, or while being led by unfacile administration and management. True that, an IPO can pave way an instant deluge of capital, but it is also bound to attract public survey policies, raids and federal investigations on its liability and certification. A considerable amount of planning is always underway to bring out the IPO into a reality but sometimes, it is disastrous indeed that the IPO is launched only to be dispensed with in course of time. Following are some of the IPOs that failed by the line :
Vonage went public as an Internet phone provider. Driving itself through all the romp and tickling, it projected itself into the public eye with lot of focus on advertising and branding. Vonage was poised to inaugurate itself in the stock world and buy success out of it. All seemed to be well at first, with the propitious company capitalising $531 million on the first day. It was a transient triumph however, as it was soon reported that in about a week of trading since the IPO launch, it crashed and laid off about 30% of its share value due to a lawsuit. The free fall began literally one the very first day of trading following the much hyped launch of the IPO, that only played a devil’s advocate to its downtrodden path of failure. In what was called to be 2006’s worst trading day, it became almost certain that the firm would almost never catch up.
The failure story of Kozmo.com was not an unexpected outcome when it became apparent that the company hit the skids as its business model failed to effectively substantiate the public demand. Kozmo.com was launched on the idea of delivery of daily use/entertainment items such as eatables, CDs,groceries,etc. Unfortunately, this was not a sustainable model, as it bombed miserably and was forced to lay off 2000+ employees which was nearly its entire workforce.
The company was based in San-Francisco. Unaware of the fact that pet shopping that too online was a crude idea in itself, Pets.com was also ignorant of how an upstream disadvantage of additionally feeding the pets could cripple its prospects. But neither did Amazon.com that held a major stake see disaster coming. Pets.com had its IPO in 2000 and raised an impeccable $82 million, but that wasn’t anywhere near enough to make up for a leaky and flawed business plan. There was a monstrous breakdown at the stock market where its share value sank from $14 to a mere 22 cents.
Webvan made it into the public moonlight with a unique idea : delivery of groceries. While the idea is now lucratively perceived by certain services, shareholders of those days did not appreciate the bulk of capital Webvan enveloped itself with in the name of an IPO that unforseeably flunked. So when the blooming company raised $375 million in its IPO, it was only a pinch of time before Webvan was transcended by its own frenzied growth. The company eventually registered for insolvency at the capital front, laying off some 2,000 employees and becoming yet another paradigm in the light of failed IPOs.
Lantronix was an electronic monitoring device. The manufacturers never realised they were heading for a setback right from the very first moment of initiation of the business model. First up, it sank from its initial offering of 9 million shares to about one third of it. Soon after that it shed the price of its share from $15 to $10. And when Lantronix ultimately went public, shares spun down to 20 percent on the very first day. Lantronix was immediately caught right in the nexus of a federal investigation by security regulators. In the end, Lantronix’s shares were valued at a mere 70 cents a piece, thus putting a pitiable end to its tale.
Blackstone was one of those over-hyped IPOs of the West that took a great fall upon its release. Considered as the sixth biggest IPO in history at the time of its launch, thanks to its atrocious over-hype and ambition, the company was literally ‘blackstoned’, or so do reports speak. What virtually no one saw coming was the monstrous crash that followed, as Blackstone stock had fallen by almost half which was a matter of great concern among the investors.
The eToys website was brimming with features like toy reviews, age-wise recommendations and digital newsletters. Sadly, eToys.com fell victim to some of the same problems that prior to itself, had brought down Webvan and Kozmo. eToys had to build a massive and hugely expensive infrastructure from the ground up to be able to stock and deliver such a wide variety of toys to so many people. eToys went public at $20 a share and mushroomed to $76 a share on its first day. But it took a huge dip soon later that year. In response, it paid more attention on infrastructure to increase the demand that fell low but this never worked out. eToys had to shed large amounts of money on infrastructure alone to keep up the momentum. The dotcom product that started out as a success apparently bombed out as a flame-out.
3. Arc Sight
We have seen business plans that failed to hold the initial grip due to poorly chalked out plans. But there are also some that hit new lows as the stock responded negatively to the public expectations. Sometimes, the conditions seem far too inhospitable that growth was definitely not the outcome. ArcSight I.P.O couldn’t keep the hype going. It succumbed to the paramount pressure offered by the trade markets. Inspite of managing to raise $50 million, ArcSight’s stock was forced to shut down on its inaugural day and fell rapidly by the end of the year. It was already too late to even make a comeback.
2. Shanda Games
In China, Shanda Games is termed as a mainstream giant in the online gaming sector. So, it decided to make moves over to the USA and go public. It went public on Sep 23, 2009. With over $1 billion being raised, it was hailed to be one of the largest American IPOs of its time. However, things didn’t go the right way. Shanda Games literally derailed as it struggled to attract new investors as its stock plunged from $12 to $1.75 the coming day.
Facebook’s incoming into the stock market witnessed massive promotions and expectations in the trading world. But what it failed to know was that the markets were never predictable and in the nick of time that elapses, anything could go wrong. Just as the ambitious share value of $38 peaked to $45 it fell through great heights. A Nasdaq trading system crash due to technical glitches made it cumbersome for investors to know whether or not they owned the stock. This resulted in over-buying by the investors.The aftermath was not far away. The IPO was a huge flop, a completely wrong side of the coin that appeared. However, inspite of its initial worries, the stock picked up on some gains and presently continues on, although much below par its expectations.