From IBM to Apple: the good, the bad and the ugly of tech IPOs
Facebook has raised $16bn after launching its IPO on the Nasdaq, making it the third-biggest offering ever in the US. Here is a selection of other tech floats that have either gone on to soar or disappoint.
|
|
|
|
|
|
Steve Jobs and Steve Wozniak began work on what would become Apple I computer in 1975 Photo: Reuters
Learn a new language at your own pace
Studying a new language doesn’t have to mean
stepping back into the classroom. Babbel offers 13 language courses
that can be studied online and on the go.
Sponsored by Babbel
6:26AM BST 18 May 2012
1 Comment
Apple
In 1975, Steve Jobs and Steve Wozniak began work on what would become
Apple I computer – essentially a circuit board – in Jobs’ bedroom. Today
Apple is worth more than $500bn and its products are arguably the most
sought-after in the world.
No one could forsee the meteroic rise that would grace Apple - the launch appeared on page 12 of the Wall Street Journal -
especially not the regulators in Massachusetts. Prior to the IPO, the
state deemed the move "too risky". When Steve Jobs took his technology
company public on December 12, 1980, it was behind Tandy in sales of
personal computers.
At the IPO,
Apple shares were offered to the general public at a price of $14 each.
At the opening bell, the stock was priced $22 and sold all 4.6m shares
within minutes. In its first day of trading Apple closed at $29, giving
the company a market valuation of $1.778bn.
The company made less than $100m from selling its stock to the public - a sum Apple now makes in eight hours in its stores.
However, Apple’s stock offering had generated
more capital than any IPO since Ford in 1956 and instantly created about
300 millionaires at Apple – more than any company in history at the
time. Jobs, holding 7.5m shares, was worth about $217m. He said: “I was
worth over a million dollars when I was twenty-three, and over ten
million dollars when I was twenty-four, and over a hundred million
dollars when I was twenty-five… And it wasn’t that important because I
never did it for the money.”
After the initial flurry, its share price bumped along for almost of two decades, until Jobs, who was famously ousted in the early 1990s, returned to the business. His sharp focus on perfecting a handful of products - notably the Mac, the iPhone and the iPad - transformed the business as well as the share price, turning the old hierarchy with Microsoft, Apple’s archrival, on its head.
Last month Apple recorded Q1 profits of $11.62bn. Revenues hit $39.19bn.
Google
When Google launched its IPO in August 2004, the dotcom bubble had burst and big-money institutional investors were far from interested in tech stocks.
They then launched their IPO in a slightly odd way. Instead of letting the underwriter dish out shares to favoured institutions, Google held a "Dutch" auction in which everyone who wanted a share put in a bid. The lowest successful bid became the price that everyone got their shares at, even if they bid a higher amount. This method guarantees that the initial offering price is set to sell all of the shares at a price that conservatively reflects market demand.
Google's initial price range for the stocks was between $108 and $135 per share. However, that fell to $85, opened at $100 and closed at $100.34. The company had raised $1.67bn, but smart Google employees had purchased shares for as little as 30 cents a share when it was still a private company.
Founders Larry Page and Sergey Brin each made more than $40m from the float and still retained 16pc stakes in the business.
The stock traded at 19-times forward earnings in 2004 on growth of more than 100pc. Google closed at $194 at year-end 2004, reaping the IPO investors a healthy gain.
The tech giant then delivered higher earnings every year through 2007, albeit also at a slower growth rate, and from the IPO until the end of 2005 the stock movement was consistently upward.
Last month Google said Q1 profits hit $2.89bn on revenues of more than $10bn.
Shares in eBay jumped 163.2pc to close at $47.375, up $29.375 from its target price of $18 a share. The stock opened at $53.5.
Floating 3.5m shares, eBay raised $63m, and boasted a market cap of around $1.9bn.
During the first six months of 1998, the company reported profits of $348,000 on revenues of $14.9m.
In April it revealed Q1 profits of $725m on revenues of $3.3bn.
Between 1927 and 1929, demand for its time cards and accounting machines helped to more than quadruple its value from $54 a share to a peak of $216 shortly before the Wall Street crash.
Then, along with the rest of the market, it came a cropper. By 1932, IBM’s share price had sunk to just $9.125.
Its then-president, Thomas Watson, declared that IBM would spend its way through the slump, investing $1bn in research and development and keeping its factories running at full speed even though it meant stockpiling computers in warehouses. It was a high-risk strategy, but one that paid off and helped propel IBM shares steadily higher until the early 1980s.
The company raised cash through a series of share splits, such that one share in 1924 would by now have proliferated to 3,460, worth more than $500,000 and nearly $9,000 in annual dividends.
Last month, IBM posted Q1 profits of $3.1bn on revenues of $24.7bn.
“I’ve never received as many phone calls about a new offering as I have over the last month with Microsoft,” Ron McCollum, a broker with Paine Webber in Seattle, said at the time.
Trading opened at $21 per share and almost immediately shot up to near the first-day closing price of $27.75.
Not surprisingly, Microsoft’s co-founders, Bill Gates and Paul Allen, became instant millionaires - although Allen told the Seattle Post-Intelligencer, that while he might buy some Champagne, the riches wouldn’t change his life.
Those with equity stakes got to enjoy that day many times over, as the company split its shares nine times, handing them a fresh windfall every few years until the last split in 2003. Microsoft’s shares rose sharply and steadily throughout the latter half of the 1990s.
However, Microsoft’s upswing ended in the early 2000s. After riding high for nearly a decade, it ceded its place in the technology pecking order to Apple, falling from a high of $58.38 a share in 1999 to around half that figure, where it has remained pretty stagnant since.
In April Microsoft revealed Q1 profits of $5.11bn on revenues of $17.41bn.
It set a target price of $13 at its IPO in 1996 but a frenzied day of trading saw them open at $24.50 and close at $33 — giving Yahoo! a market value of $848m. At the time, it was the Nasdaq’s second-biggest first-day gain (behind Secure Computing Corporation, another internet startup) and handed Jerry Yang and David Filo, the two Stanford University graduates who launched the company, $165m apiece.
Many early investors in the search company were individuals rather than the traditional institutions, eager to cash in on the dotcom boom and attracted by Yahoo!’s memorable name. All the same, some commentators hailed the frenzy as “startling” given Yahoo! faced “a host of competitors who have nearly identical products”. They also wrinkled their noses at Yahoo!’s $634,000 loss on $1.4m of revenues.
Those commentators turned out to be right.
The late 1990s dotcom darling escaped a big boom and bust, and in 2008 famously turned down Microsoft’s $31-a-share bid because it thought it could do better. Instead of doing that, however, it settled into a steady decline as similar companies grew up around it - only ones that were smarter and had more purpose. Since Microsoft’s offer, Yahoo! has nearly halved in value.
In April it announced Q1 profits of $287m on revenues of $1.2bn.
Before the IPO, the pioneering online retailer raised its target price twice, starting at $12 to $14 before settling on $18 a share the night before it went public. It ended its first day of trading $54m richer as shares soared 30pc - never mind the fact that the company had never turned a profit, and would not do so for another six years.
Inevitably, analysts were divided. “Twenty times sales is a big market cap,” Ragen Mackenzie at Seattle’s Ragen MacKenzie said at the time. “What people have to wrestle with is the competitive entry of Barnes & Noble and Borders.”
So far those fears have proved unfounded. Amazon routinely chalked up losses as it plowed funds into its monolithic website, but it also managed to grow its online audience from 2,200 daily visitors in December 1995 to about 50,000 at the time of its IPO, and 282m last June — more than a fifth of people using the internet.
Its share price has followed a similar trajectory as the company expanded into different retail markets, and then into hardware with the launch of the Kindle e-reader and the Kindle Fire tablet computer.
Last month Amazon announced Q1 profits of $130m on revenues of $13.18bn.
After the initial flurry, its share price bumped along for almost of two decades, until Jobs, who was famously ousted in the early 1990s, returned to the business. His sharp focus on perfecting a handful of products - notably the Mac, the iPhone and the iPad - transformed the business as well as the share price, turning the old hierarchy with Microsoft, Apple’s archrival, on its head.
Last month Apple recorded Q1 profits of $11.62bn. Revenues hit $39.19bn.
They then launched their IPO in a slightly odd way. Instead of letting the underwriter dish out shares to favoured institutions, Google held a "Dutch" auction in which everyone who wanted a share put in a bid. The lowest successful bid became the price that everyone got their shares at, even if they bid a higher amount. This method guarantees that the initial offering price is set to sell all of the shares at a price that conservatively reflects market demand.
Google's initial price range for the stocks was between $108 and $135 per share. However, that fell to $85, opened at $100 and closed at $100.34. The company had raised $1.67bn, but smart Google employees had purchased shares for as little as 30 cents a share when it was still a private company.
Founders Larry Page and Sergey Brin each made more than $40m from the float and still retained 16pc stakes in the business.
The stock traded at 19-times forward earnings in 2004 on growth of more than 100pc. Google closed at $194 at year-end 2004, reaping the IPO investors a healthy gain.
The tech giant then delivered higher earnings every year through 2007, albeit also at a slower growth rate, and from the IPO until the end of 2005 the stock movement was consistently upward.
Last month Google said Q1 profits hit $2.89bn on revenues of more than $10bn.
Ebay
The online marketplace almost tripled its share price after the first day of trading on September 24, 1998 - the height on the dotcom bubble.Shares in eBay jumped 163.2pc to close at $47.375, up $29.375 from its target price of $18 a share. The stock opened at $53.5.
Floating 3.5m shares, eBay raised $63m, and boasted a market cap of around $1.9bn.
During the first six months of 1998, the company reported profits of $348,000 on revenues of $14.9m.
In April it revealed Q1 profits of $725m on revenues of $3.3bn.
IBM
Listing in 1916, IBM is the original poster child for technology boom and bust. After eight years on the New York Stock Exchange as Computing Tabulating Recording Corporation, the company changed its name to International Business Machines and ushered in a period of extraordinary growth - becoming a kind of early 20th century equivalent of Apple.Between 1927 and 1929, demand for its time cards and accounting machines helped to more than quadruple its value from $54 a share to a peak of $216 shortly before the Wall Street crash.
Then, along with the rest of the market, it came a cropper. By 1932, IBM’s share price had sunk to just $9.125.
Its then-president, Thomas Watson, declared that IBM would spend its way through the slump, investing $1bn in research and development and keeping its factories running at full speed even though it meant stockpiling computers in warehouses. It was a high-risk strategy, but one that paid off and helped propel IBM shares steadily higher until the early 1980s.
The company raised cash through a series of share splits, such that one share in 1924 would by now have proliferated to 3,460, worth more than $500,000 and nearly $9,000 in annual dividends.
Last month, IBM posted Q1 profits of $3.1bn on revenues of $24.7bn.
Microsoft
Microsoft initially planned to offer 2.5m shares at its IPO in March 1986, but bumped that figure up to 3m at the last minute after being inundated with requests from investors.“I’ve never received as many phone calls about a new offering as I have over the last month with Microsoft,” Ron McCollum, a broker with Paine Webber in Seattle, said at the time.
Trading opened at $21 per share and almost immediately shot up to near the first-day closing price of $27.75.
Not surprisingly, Microsoft’s co-founders, Bill Gates and Paul Allen, became instant millionaires - although Allen told the Seattle Post-Intelligencer, that while he might buy some Champagne, the riches wouldn’t change his life.
Those with equity stakes got to enjoy that day many times over, as the company split its shares nine times, handing them a fresh windfall every few years until the last split in 2003. Microsoft’s shares rose sharply and steadily throughout the latter half of the 1990s.
However, Microsoft’s upswing ended in the early 2000s. After riding high for nearly a decade, it ceded its place in the technology pecking order to Apple, falling from a high of $58.38 a share in 1999 to around half that figure, where it has remained pretty stagnant since.
In April Microsoft revealed Q1 profits of $5.11bn on revenues of $17.41bn.
Yahoo!
Of all the technology juggernauts whose rise has been followed by a fall, Yahoo!’s has been the most marked.It set a target price of $13 at its IPO in 1996 but a frenzied day of trading saw them open at $24.50 and close at $33 — giving Yahoo! a market value of $848m. At the time, it was the Nasdaq’s second-biggest first-day gain (behind Secure Computing Corporation, another internet startup) and handed Jerry Yang and David Filo, the two Stanford University graduates who launched the company, $165m apiece.
Many early investors in the search company were individuals rather than the traditional institutions, eager to cash in on the dotcom boom and attracted by Yahoo!’s memorable name. All the same, some commentators hailed the frenzy as “startling” given Yahoo! faced “a host of competitors who have nearly identical products”. They also wrinkled their noses at Yahoo!’s $634,000 loss on $1.4m of revenues.
Those commentators turned out to be right.
The late 1990s dotcom darling escaped a big boom and bust, and in 2008 famously turned down Microsoft’s $31-a-share bid because it thought it could do better. Instead of doing that, however, it settled into a steady decline as similar companies grew up around it - only ones that were smarter and had more purpose. Since Microsoft’s offer, Yahoo! has nearly halved in value.
In April it announced Q1 profits of $287m on revenues of $1.2bn.
Amazon
Three years after Amazon launched in 1997, it capitalized on the dotcom boom and went public, turning its founder Jeff Bezos into America’s second-richest man under 40.Before the IPO, the pioneering online retailer raised its target price twice, starting at $12 to $14 before settling on $18 a share the night before it went public. It ended its first day of trading $54m richer as shares soared 30pc - never mind the fact that the company had never turned a profit, and would not do so for another six years.
Inevitably, analysts were divided. “Twenty times sales is a big market cap,” Ragen Mackenzie at Seattle’s Ragen MacKenzie said at the time. “What people have to wrestle with is the competitive entry of Barnes & Noble and Borders.”
So far those fears have proved unfounded. Amazon routinely chalked up losses as it plowed funds into its monolithic website, but it also managed to grow its online audience from 2,200 daily visitors in December 1995 to about 50,000 at the time of its IPO, and 282m last June — more than a fifth of people using the internet.
Its share price has followed a similar trajectory as the company expanded into different retail markets, and then into hardware with the launch of the Kindle e-reader and the Kindle Fire tablet computer.
Last month Amazon announced Q1 profits of $130m on revenues of $13.18bn.
