Well that was fast. LinkedIn's stratospheric IPO was supposed to signal the start of the latest new era of the tech/Wall Street extravagance combo. Pandora was to have been the second rocket in that fusilade. Oh well. The global economy dispenses. Europe's debt woes, waning profitability, disappearing jobs - how could all that boring stuff mess up the tech parade! It aint fair.
But there you have it. The global economy is more tightly linked than ever. We have benefited from the disappearing silos - but we are also subject to their negative consequences as well. Serious questions had been raised about the latest tech bubble long before Pandora announced. All it took was a cold, hard dash of economic reality to finish what the whispers had started. Will it pull out? Eventually, assuming the business model on which it is based proves up over time under adverse economic circumstances. And come to think of it, that's a pretty good test of viability for which the company will eventually be grateful. JL
Telis Demos reports in the Financial Times:
"Pandora Media, after a “pop” of as much as 60 per cent on its debut trading day on Wednesday, has dipped below its initial public offering price in just its second day of trading.
The mobile and web streaming music group joins other internet companies that saw a surge of initial demand to later fall below their offering price, including Renren, the Chinese social network, and Demand Media, a provider of low-cost web content.
Pandora shares fell to $13.26 on Thursday, after pricing at $16 a share earlier this week and reaching as high as $26 on its Wednesday debut.
Some groups, such as LinkedIn, have not crossed their IPO price but are trading well below the peak levels seen on their first day of trading. LinkedIn is more than 40 per cent below its peak price of $122 a share, with more than 14 per cent of its shares shorted, according to Data Explorers.
However, it took weeks or months for these other IPOs to “break”, or fall below their initial price. Pandora, thanks in part to investors in the US broadly fleeing risk after disappointing economic data and a resumption of the European sovereign debt crisis, has had that timeline greatly compressed.
“I’m surprised, you don’t seen an IPO like this break so quickly,” said Josef Schuster, president of IPOX Schuster, a fund that invests in IPOs.
Shares of Glencore and Samsonite, two much larger and more established companies to recently go public, are also trading below their initial prices. Glencore, the commodity trader, has seen shares slip in London from 520p on its first day in May to 475p. Samsonite shares in Hong Kong fell 7.7 per cent on their debut, to HK$13.38.
Many hedge funds that buy IPOs do not take a long-term view of the company, intending to immediately sell to profit from the first-day bounce.
Institutional investors still dominate the IPO process, especially as flows into small-cap funds give them capital to invest. But even those investors can feel pressure to sell if prices correct too quickly.
“You have investors like hedge funds who don’t want to be in a falling stock, that’s one of the key reasons,” said Mr Schuster. “But institutions investing for the long-term are sitting on big losses already, and more are staying away altogether.”
Tech IPOs have outperformed in first-day trading in the US this year, with an average jump of 24 per cent, according to Dealogic.
However, they are up just 15 per cent in trading since their IPOs. By contrast, US healthcare deals are on average up 23 per cent since their IPOs, despite just a 12 per cent first-day jump.
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