"Now these readers, well they'll know our names/ the bankruptcy punch sound is our claim to fame/ and that's why they call us worst IPOs in history, we can't deny/ bad, bad IPOs till the day we die."
These companies felt like makin' money but that was all just a Wall Street fantasy! Learn from their mistakes and make sure your business model isn't based on shortsighted calculations and sock puppet fumes.
In the late 90s there were only four pet stores online and Pets.com was the brand to beat. Primarily because of its URL, its great slogan, "Pets.com. Because pets can't drive," and its popular sock puppet mascot (popular enough to be a balloon in the 1999 Macy's Thanksgiving Day Parade). The problem was that buying pet stuff online is a bad idea. Haha! Whoops!
Pet supplies just cost way too much to ship, so having such a myopic focus was the brand's ultimate undoing. Pets.com had one of the worst IPOs in history, taking in $82 million and eventually dropping down to $.22 before getting put to sleep. Now PetSmart uses the URL to redirect to PetSmart.com. Ooo that hurts!
Add this to your list of basic stock trading strategies for beginners. Shanda Games makes several popular multi-player online role-playing games. The company intended to make a big splash in the US stock market but instead ended up as one of the worst IPOs in history. The price was set by JP Morgan and Goldman Sachs.
Everyone was so excited that they made the offering 83.5 million shares at $12.50 each. Beaucoup bucks! Shanda raised $1.04 billion. Wow! But all the investors willing to pay that much had already paid that much, so literally after a day of trading the stock took such a hard plunge that when the market closed the price was $1.75! Oh no!
Webvan.com? Is that a service that lets you rent vans online? No? It's a grocery delivery service that guarantees the arrival of your purchase in under 30 minutes?! Well, that's one problem right there: I would not expect a site called Webvan to be a grocery delivery service. I will not be going there, thank you very much!
Part of Webvan's undoing was that they spent $25 million to build giant automated warehouses. Amazon barely generates a profit and they sell everything! And you think your groceries only approach is going to work? Let's check the stock market's history: IPO makes $375 million in 1999, and the company goes bankrupt 18 months later. We'll take a rain check on Webvan, one of the worst IPOs in history.
You don't have to be listening to the top personal finance podcasts to recognize a bad business model on the precipice of being one of the worst IPOs in history. Kozmo promised to bring movies and nosh to your doorstep in under an hour with no delivery fee. The reasoning was that by operating in major cities that required no warehouses for storing goods, the company would be able to offset the cost of free delivery. Maybe Kozmo would have been better off selling pipe dreams!
Nonetheless, Kozmo managed to get a lot of investors interested, including Amazon, and pulled off a cross-promotional deal with Starbucks. Woo wee woo waa! Great success? Not quite. Kozmo was losing so much money that they were never even able to deliver on the promise of having an IPO in the first place! Kozmo managed to have one of the worst IPOs in history without even having an IPO. Sad!
You might have forgotten about Groupon. But there was a time when it hit $1 billion in sales super fast. The company went public at $20 but in under 13 months it was under $5. Small businesses just realized it wasn't in their best interest to be giving their services away at such a significant discount. It didn't help that Groupon users became notorious for not tipping. Not only one of the worst IPOs in history, but also a subpar business model.
theGlobe.com was Friendster before Friendster became Ello. I'm the Dennis Miller of social media jokes! The IPO was $9 and skyrocketed to $65. The dot-com bubble bursting took care of theGlobe as it went tumbling down to $.1 in two years.
Hopefully, the same thing will happen to Facebook. YOU BETRAYED US FACEBOOK; YOU WERE SUPPOSED TO BE THE CHOSEN ONE! Now you're stuck in a Star Wars prequel joke, and that's exactly where you belong!
Facebook's IPO was $38. The stock shot up to $45, and then dipped quickly. There was fear the company was going to go below the IPO, which may have spurred people to abandon the stock en masse. But Facebook lucked out. As underwriters hurried to buy back stock, a bevy of technical glitches intervened to help kept the price hovering just above the IPO at $38.23.
As is often the case with Facebook, there was controversy. Reuters alleged that Morgan Stanley informed selected clients of adjusted earnings forecasts. Later, Morgan Stanley settled a suit for $5 million. I guess we learned a valuable lesson: don't trust Facebook with important information. Oh, wait, we didn't learn that and now Trump is president. Whomp whomp!
"Back in my day we didn't have WebMD to give us anxiety over illnesses we didn't have. We had DrKoop." "What was that grandma?" "It was just WebMD." DrKoop was created by one time Surgeon General Dr. C. Everett Koop. Great name for a doctor; awful name for a website.
It's cool to call your friend Koop. "Aw, man, you shoulda seen Koop last night; he was making it rain in the club!" "What can I say; all my friends are dead!" Wow, cool doctor; he listens to Lil Uzi Vert! But if I had to choose between DrKoop and WebMD, I'm choosing WebMD every time because I know what WebMD is without thinking about it and DrKoop needs to be explained to me.
What really did DrKoop in was the dot-com bubble rupturing like an inflamed appendix. The website's IPO raised $88.5 million but by 2001 DrKoop was DrKaput.
Reading the best books on investing ever written wouldn't have prepared you for Vonage's disastrous 2006 IPO. At first, things looked good as the company raised $530 million. Cha-ching! Then a technical glitch made customers think they never actually bought stocks, and the company lost 30 percent in a week. Ker-plunk! One glitch is bad; two is even worse! Then customers found out their purchases did go through at the original stock price. THE HELL IT DID! Vonage had to pay $800,000 to angry customers after losing a class action lawsuit.
Fun fact: Vonage's headquarters are in Holmdel, New Jersey near the childhood home of internet funnyman Ben Kharakh.
The hookup site FriendFinder.com debuted at $8 a share only to see shares take a sexy, slippery slide down to $1.20. Oh, that was terrible for everyone? Well, looks like they should have launched InvestorFinder.com instead. Although, if InvestorFinder is anything like FriendFinder I would just assume it's mostly fake profiles designed to trick men. A classic catfish just like Ashley Madison!