Groupon And Zynga Are The Worst-Performing Stocks Of The Year
Near the end of 2011, two hot Internet companies conducted rich initial public offerings that seemed to inaugurate a new Internet stock boom. Groupon, a daily deals web site, raised $700 million and was valued at $13 billion. Online game maker Zynga raised some $1 billion and was valued at nearly $9 billion. WithFacebook’s IPO on its way, the people behind these companies promoted the idea that 2012 was going to usher in a new era for Internet companies and the venture capital firms that backed them. “Our goals were we want to raise a billion dollars,” Mark Pincus, Zynga’s CEO, said at the start of 2012. “Through going public, we wanted to add some more great long-term investors to the company. All of that was successful.”
Those long-term investors probably have another way of describing their investment in Zynga. Any long-term shareholders of Zynga and Groupon would have been better off investing in the stock of any other major U.S. company in 2012. With the shares of Groupon and Zynga down 74.4% and 74%, respectively in 2012, their stocks are now the worst-performing shares among U.S. companies with market capitalizations greater than $1 billion, according to data pulled from Interactive Data and Thomson Reuters via FactSet Research Systems.
It’s already October and with a little more than two months left in the year shares of Groupon and Zynga have sunk quite a bit lower in 2012 than other big losers like Alpha Natural Resources, down 68%, and NII Holdings, down 62%. No matter how the year ends, Groupon, Zynga, and the ongoing Facebook stock debacle have made sure that the 2012 stock market, which has performed incredibly well, will also be remembered for this second wave of Internet IPO busts.
Nevertheless, there doesn’t seem to be much self-reflection going on in Silicon Valley or in the venture capital industry—where people like to blame the supposedly crazy demands of stock market investors for these disasters. Mark Zuckerberg has said that while the stock performance is disappointing,“nothing has to change” at Facebook. Marc Andreessen, who is on the boards of directors of Silicon Valley’s most embarrassing stock flops of 2012, Facebook and Hewlett-Packard, saw his venture capital firm, which invested in Facebook and Zynga, close a $1.5 billion fund this year. Co-founders like Pincus and Groupon Chairman/venture guy Eric Lefkofsky have already sold material amounts of their Zynga and Groupon shares, but don’t ask them to take too much responsibility.
“When you look at the recent IPO of Facebook, when you look at Zynga, when you look at Groupon, there is no question that these companies have been very volatile,” Lefkofsky said on CNBC today when asked what happened. “Investors have been bounced around quite a bit over the past few months, why that is, I am not really an expert in the field and couldn’t really tell you.”