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September 9, 2011 4:55 pm
US equity capital markets made a cautious re-opening this week after a tumultuous month, but the most anticipated names on the docket, Groupon and Zynga, decided to wait a little longer before selling shares.
Initial public offerings of tech groups related to social networking had been among the bright spots for global markets earlier this year, with fundraisings by the likes of LinkedIn, Pandora and Fusion-io.
But Groupon and Zynga, according to people familiar with their thinking, have decided not to test the markets in September, following a spike in stock-market volatility.
The IPO market had been shut in August, following whipsaw trading after a US sovereign credit downgrade and the unravelling of a bail-out deal for Greece. It was hoped the market would reopen after Labor Day.
But the beginning of September saw the sharpest three-day S&P 500 index drop in that period since 2002, following a poor US job market report. Investors pulled cash from domestic equity funds this week, according to Lipper, reversing two weeks of inflows.
Earlier this summer, Groupon, the online coupon-seller, and Zynga, a maker of games for Facebook, had filed to go public with an eye on September. LivingSocial, a Groupon competitor, was also said to be lining up banks.
After choppy trading for LinkedIn, the business-focused social network, which is down 11.8 per cent since the end of its first day of trading – though still up 85 per cent from where it initially sold shares – some investors began to doubt the very strong valuations of such web companies, often more than 30 times last year’s revenues.
Efforts by Groupon’s chief executive to combat that perception, in the form of a leaked internal email to employees, raised concerns that the company could fall foul of US regulators’ rules governing the “quiet period” before an IPO.
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