Corporate giant Facebook joins McAfee and eToys.com on the hit list
What are five of the most controversial IPOs in global history? Would you know if you were asked in a Trivial Pursuit game?
If not, read on for a basic primer of some of the most controversial over the last two decades.
What is an IPO?
An IPO is an initial public offering, which refers to the process of offering shares in a private corporation to the public as new stock issuance. This public share issuance allows a company to raise capital from public investors.
The transition from a private to a public company can be a critical time for private investors to fully realize gains from their investment as it usually includes share premiums for current private investors. It also allows public investors to take part in the offering.
When companies go public via an IPO to raise capital for their business, some IPOs rake in billions of dollars. Others stumble and fall, often before they’re even out of the starting gate, and some of those never recover.
5 Controversial IPOs
2020: McAfee Corp.
McAfee Corp is an American global computer security software company that is headquartered in San Jose, California. Intel bought it in 2011 and then converted its Intel Security division into a joint venture with TPG Capital and called it McAfee.
It’s not as splashy as it was two decades ago, but personal computer sales increased during the pandemic when many employees started working from home. But, other ‘Big Tech’ companies have ben encroaching on McAfee’s turf. It’s also stumbling with a significant debt load, largely because of its private-equity past.
The result is this is an IPO in a relatively hot market that has never traded above its IPO price of $20. Low-growth tech stocks generally struggled in the 200 pandemic market, but McAfee hasn’t shown it can, or will, be the exception.
2012: Facebook
Facebook is an American online social media and social networking services, which Mack Zuckerberg and four fellow Harvard College students and roommates founded in 2004. It now is owned by Facebook, Inc.
Given so many of its recent controversies, it’s easy to forget the hype that followed its IPO announcement in 2012. It launched at $38 a share, but ended the year at low $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 levelled accusations of impropriety and information sharing.
2011: Groupon
Groupon is a Chicago-based global e-commerce marketplace, which connects subscribers with local merchants by offering activities, travel, goods, and services in 15 countries. It came to Toronto soon after launching in November 2008. By late 2010, it was available in 150 North American and 100 European, Asian, and South American cities with 35 million registered users.
At the time it launched, Groupon’s IPO was the largest by a U.S. web company since Google in 2004. There was a lot of excitement about the daily deals company: it had already rebuffed a significant offer from Google and hit $1 billion in sales faster than any other company in history.
Groupon went public in 2011 at $20, but a year later, its shares were trading for less than $5. Launching the IPO uncovered the flaws in its business model, with many comparing it to a Ponzi scheme. Sales slowed, profits dropped, and Groupon started discounting consumer goods rather than local services to survive.
2000: Pets.com
Pets.com was a dot-com enterprise, headquartered in San Francisco, which sold pet supplies to retail customers. It began operations in November 1998 and liquidated in November 2000. The company initially had great sales, but lost money due to mismanagement, and it became one of the most notable victims of the 2000s dot-com bubble.
It initially looked like Pets.com had everything going for it: a strong brand, great advertising, and an IPO to take it to the next level. But, despite raising $82.5 million, it was shaky. When it just had $619,000 in revenue, it spent 11.8 million on marketing in its first year, including $1.2 million for a Super Bowl ad.
1999: eToys.com
When online toy retailer eToys.com went public at $20 a share in 1999, it ended its opening day with shares trading at $76. But, after two years and several catastrophes, the company filed for bankruptcy.
e.Toys.com tried to compete with the more established Toys R’ Us, but couldn’t. It built very expensive infrastructure to fulfil its orders, but still failed to do so, leaving many customers disappointed during the critical Christmas sale. It then doubled down and built more warehouses, but its demand never increased. It spent its cash reserves on marketing, but finally liquidated – with Toys R’ Us acquiring its domain.
