Initial public offerings (IPOs) can be volatile for tech companies. Whether your company is a hot app startup, a midsize tech company taking the next step, or a billion-dollar unicorn finally wading into public waters, tech IPOs can catapult a company to new financial heights or very quickly cause it to plummet down to earth.
For Lyft, the ride-hailing app that went public last week, it took only three days for its share price to take a dive close below its IPO price.
According to data from Statista and Yahoo Finance, this isn’t necessarily a bad thing. Facebook’s stock price also dipped below its IPO share price after three days, and despite the company’s disastrous, scandalous last two years, its closing share price is still up 344 percent on its IPO price as of April 1.
Tech startups such as Square and dating app powerhouse Match Group (which owns Tinder, Match, OKCupid, and Plenty of Fish) and as well as few of these dating apps also dropped below their IPO prices within three months of going public. Today, Square’s stock price is up a staggering 748 percent over its initial value, and Match is up 369 percent.
For hardware startups, where production and distribution overhead is typically higher, it can be tough to stay in the green when you’re riding a consumer fad. Action cam maker GoPro and wearables manufacturer Fitbit kept their share prices above their starting IPO prices for 207 and 504 days, respectively, but a few years later both companies are down more than 70 percent. In GoPro’s case, the company has gone through layoffs and pulled the plug on its drone business.
Speaker company Sonos, which went public last year, has run into similar woes. The company’s stock fell below the IPO price threshold in 19 days and is currently down 30 percent.
Then there are the big social-media IPOs. Facebook remains a success story from a financial perspective, whereas Snap, which Facebook has come after relentlessly with copycat products such as Instagram Stories, has consistently struggled since going public. Snap had one of the hottest tech IPOs in 2017, but within five months, it had dropped below its IPO price. Today, it’s down 33 percent as it battles declining user numbers, experiments with UI redesigns, and looks for new revenue streams.
Somewhat surprisingly, one of the long-term success stories is Twitter. The social-media company went public in 2013 despite being nowhere near profitable, and its share price remained above its IPO price for nearly two years. The company has struggled with a range of issues, from layoffs to continued struggles with content moderation and conduct policies, but somehow, Twitter became consistently profitable in 2018, and its shares now hover 29 percent above its IPO price.
Lyft is far from profitable right now and remains a small fish compared with its chief rival, Uber (which is also rumored to be mulling over an IPO). Only time will tell whether Lyft’s modest market footprint helps or hurts its long-term value. Tech IPOs are fickle like that.