Boom or Bust? Tech IPOs Can Go Either Way

Ride-hailing company Lyft went public on Friday in what was the first of several high-profile tech IPOs anticipated in 2019. After seeing healthy demand in the days leading up to the public offering, Lyft had priced its IPO at $72 per share, above the initially given range of $62 to $68. Despite that price hike, Lyft’s shares started trading at $87.24 on Friday, more than 20 percent above the initial price. While some argue that a healthy first-day “pop” is what makes a successful IPO, others think that it only means the company going public has left money on the table, gifting it to IPO investors instead.

During the days of the dot-com boom, tech IPOs had the reputation of being an easy win for investors, with big first-day gains virtually guaranteed. In recent years however, the market has cooled off and there are plenty of examples of tech companies that couldn’t live up to their pre-IPO hype. Companies such as GoPro, Groupon, Sonos and Fitibit are currently trading far below their IPO prices, leaving IPO investors who held on to their shares with a hefty loss on their hands.

There are other examples as well, as our chart illustrates. After a nightmare start as a public company, Facebook successfully turned things around and IPO buyers who were patient enough not to lose faith have more than quadrupled their investment by now. The same holds true for payment company Square, which went public in November 2015 and is now worth more than 8 times as much as it was back then.