When Facebook filed for its IPO a few weeks ago, investors rushed into hot social stocks like Groupon (NASDAQ:GRPN), Zynga (NASDAQ:ZNGA) and LinkedIn (NYSE:LNKD). The result: The Social Stock Tracker surged more than 9% in one week!
Things have calmed down since then. But as Facebook gets closer to its offering — which is expected to occur in May — the investor intensity will be extreme. If the valuation reaches $100 billion or more, the company will be in the league of marquee tech companies like Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC).
But Facebook’s IPO likely will have another effect: an IPO “black hole.”
Just as a real black hole sucks in everything — including light — Facebook will also get much of the attention and investor capital. Consider that Facebook may raise in excess of $10 billion.
Take a quick look at how this would compare to other recent IPOs:
| Company | Ticker | Amount Raised | Market Cap |
| Zynga | ZNGA | $1 billion | $8.8 billion |
| Groupon | GRPN | $700 million | $10.4 billion |
| LNKD | $351 million | $8.7 billion | |
| Pandora | P | $235 million | $2.2 billion |
| Zillow | Z | $70 million | $945 million |
So it stands to reason that it would be crazy for any other dot-com to try to go public before Facebook does. How could it compete? Almost any other company would lurk under Facebook’s shadow — an unfair cloud over what could be a decent prospect.
However, after Facebook comes public, we likely will see a variety of social stocks file for their offerings. Might as well ride the coattails, right?
And that could make the fall an exciting time for the IPO market.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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