Social Media Tech IPO’s in Uncertain Markets

Volatile markets and listing issues are now delaying tech IPO’s as cash flush start-ups well funded from private investors defer their public listing. This despite the LinkedIn success at garnering a tremendous response from the market, its stock price touching an all time high of $94 which was more than double issue price.
Following this stupendous success of LinkedIn at the IPO, which raised its market valuation to over $8 billion it was expected that Twitter, Groupon, Zynga and Facebook who had filed intent of going for a IPO with the SEC would soon get into the act. With the market suddenly turning volatile with the Europe and US debt issues surfacing, the tech IPO’s now seem to be faced with uncertainty.
Twitter CEO Dick Costolo surprised analysts and reporters at a press conference at its San Francisco headquarters last Thursday saying “We want to be able to remain independent and grow business the way we want to, and not be beholden to public markets until we feel like we want to be there.” The micro-blogging major which had just raised $400 million in venture financing is now stepping up to generate more advertisement revenue. In 2010 the company gingerly started introducing advertisement by Twitter users, without permitting spam that could annoy other twitter users. Such interaction has exceeded expectations creating a revenue model that Twitter lacked but sorely needed in order to survive on its own steam.

Following Twitter Group on also announced the postponement of its IPO albeit for different reasons. Investors had raised concerns over its method of calculation of profits that excluded marketing costs. Questions from SEC remain to be answered by the company just like Zynga both of who will be taking time to solve the issues before going for the IPO.
While Groupon has to redraw its metrics that excludes marketing and other expenses from its profit calculations in case of Zynga the issue lies with metrics for the measurement of its daily and monthly, as well as its bookings that have come under scrutiny. Adding to the SEC woes, the volatility in the markets and the uncertain financial climate has prompted tech the start-ups to postpone their IPO’s for now.
By: Sandip Sen