It’s been the worst kept secret for some time that in just under a month from now Facebook should be shutting up its private shop and embarking on their very own voyage to the Death Star – the initial public offering (IPO). Until a few weeks back it was fully expected they’d be giving Wall Street a record breaking IPO and basking in the glory of it all. That was until a combination of factors made it feel less likely that May was the month for the IPO of the year.
Facebook will have you think that any one of a number of factors contributed to the IPO’s delay. First off they were initially hoping to push it back a couple of weeks and instead of the original May 17 date it would be on May 28. COINCIDENCE ALERT. It just happens to be Memorial Day then so they couldn’t possibly stick it on that date. Now it’s being given a tentative “early to middle of June” date by cNet and you wonder whether June will see the IPO either.
They can easily hide behind the fact they’ve gone on quite the shopping spree recently with the acquisitions of Instagram for $1 billion and 650 patents from Microsoft for over half of that. Observers have also pointed to the firm’s profits dropping earlier this week. There’s an issue much more pertinent than any of these though. Facebook are a clever company and have obviously done their homework on the stock market. By doing so they noticed that Internet companies have been dropping like a stone in recent times.
We consulted Statista.com‘s big chart of the day (see below) and it showed that from March 26 to April 25 three of the largest firms to float have seen vast drops in the price of their stock. When you consider that Yelp was the best performing of the three with a decrease of 14 percent you start to realize why Facebook has delayed its IPO.
Groupon’s shares are down 29 percent over the period and social gaming developer Zynga, the one with closest links to Facebook, saw shares drop off by as much as 30 percent. If the other two dropping had set the panic alarms going then Zynga made sure the intruder alarms were well and truly activated.
We saw a similar thing happen in the gaming industry with poor performance meaning Skrill abandoned its own plans for an IPO this time last year. Being realistic Facebook has such a large user base (circa 900 million) to mean that an IPO could still be a success. Waiting a month or so is a shrewd decision and if the market’s gotten even worse by then they can just keep delaying.