The Best & Worst IPOs in History
This month, Japanese mobile business Softbank is set to go public with a potentially record-breaking IPO.
With that in mind, we wanted to briefly explain what that means, and look back at some of the best, worst, and downright ugly IPOs in history.
What is an IPO?
An IPO, or initial public offering, is when a company issues stock to the public for the first time, offering its shares through a listed exchange, such as the New York or Hong Kong stock exchanges.
IPO size: $25 billion
After failing to meet the listing requirements of the Hong Kong stock exchange, Chinese Internet retailer Alibaba turned to the New York Stock Exchange (NYSE) instead. With a $68 offering price, China’s largest ecommerce company debuted with an eye-watering market value of $168 BILLION – more than three times the value of eBay at the time.
On its first day of trading, the stock soared by 38%, making Alibaba founder Jack Ma the richest man in China.
To this day, it’s still the largest IPO of all time.
General Motors (2010)
IPO size: $20.1 billion
In many ways, the story of General Motors is the Rocky II of IPOs. 18 months after it was left on the mat from bankruptcy, GM came back swinging, pulling off one of the largest IPOs in U.S. history.
After its delisting from the NYSE in 2009, the automaker once again went public in 2010. And when it did, all eyes were on the U.S. government. GM had taken a $50 billion bailout to keep the lights on during the financial crisis, and the IPO was the government’s attempt to recoup their investment.
By 2013, the last remaining GM shares were sold by the U.S. Treasury.
IPO size: $700 million
At the time, Groupon’s IPO was the largest by a U.S. web company since Google in 2004. And with good reason. There was much excitement surrounding the daily deals company; it had already rebuffed a significant offer from Google, and it had hit $1 billion in sales faster than any other company in history.
Groupon went public in 2011 at $20, but fast-forward a little over 12 months later and shares were trading for under $5. Ultimately, the IPO helped uncover the inherent flaws in its business model, with many likening it to a Ponzi scheme. Sales slowed, profits dropped, and Groupon had to pivot towards discounting consumer goods instead of local services to survive.
IPO size: $16 billion
With Facebook so often mired in controversy these days, it’s easy to forget the hype that followed its IPO announcement in 2012. However, it proved to be anything but plain sailing for the Zuck’s social media giant. Launching at $38 a share, Facebook ended the year at a low of around $17.
It might now be one of the most valuable companies in the world, but at the time it was declared the worst-performing IPO of the decade. More than 40 lawsuits followed as unhappy investors sought answers to technical glitches and accusations of impropriety and information sharing.
IPO size: $166 million
When online toy retailer eToys.com went public in 1999 at $20 a share, its opening day would end with shares trading at $76. Everything, it seemed, was going to plan.
And yet, two years and a series of catastrophes later, the company was bankrupt.
Angling to compete with the more established Toys R’ Us, this was a classic example of a dot-com company biting off more than it could chew. eToys had built incredibly expensive infrastructure to fulfil its orders, and still failed to do so, with many customers left waiting for Christmas morning deliveries.
In response to this major PR nightmare, it doubled down and built more warehouses, but the increase in demand never came. After its ill-fated attempts at marketing burned through its cash reserves, eToys was liquidated – and in a delicious twist of irony, Toys R’ Us acquired the eToys.com domain.
IPO size: $82.5 million
The Icarus of dot-com companies, Pets.com took flight in 1998, and crashed and burned two years later. But it wasn’t supposed to end like that. From the outside looking in, it appeared that Pets.com had everything going for it: a strong brand, terrific advertising presence, and an IPO that would help take it to the next level.
However, despite raising $82.5 million, the business was built on shaky ground. $1.2 million went on a Super Bowl ad, with a total of $11.8 million spent on marketing in its first fiscal year – and all for just $619,000 in revenue.
Today, Pets.com redirects to the PetSmart website. Ouch.
As you can see, there’s no such thing as an uneventful IPO. Any number of things can happen to make them good, bad, or too ugly for words. We’re sure SoftBank will be doing everything it can to avoid joining the IPO hall of shame!