LinkedIn, Glencore: Is the Stock Market Going IPO Crazy?

For Wall Street, earnings season is over and the arrival of the summer doldrums could mean a boring period in the stock market. Yet, could the recent string of successful large IPOs generate enough investor interest to sustain the stock market momentum? Whether investors look at social media site LinkedIn’s (LNKD) ridiculous success on its debut as a publicly traded company or commodities giant Glencore’s (GLEN) record offering, the appetite for these companies are quite high. There’s already enough speculation on what the next large IPO is going to be, with most of the buzz building around social media companies.

While LinkedIn’s success as the first major U.S. social network to go public is being billed as the foundation for more companies like Facebook, Twitter and Groupon to do the same, China’s already ahead of the game. The streak of Chinese social media sites going public has started since last year, and have mostly been greeted with strong investor interest. Qihoo 360 (QIHU), Renren (RENN), Yoku.com (YOKU) and Dangdang (DANG) all saw huge first day pops when their stocks debuted on the market.

Undervalued IPOs

With strong first-day pops from LinkedIn and Zipcar (ZIP)–which jumped as high as 140 percent and 75 percent, respectively–investor’s would think that this would be good news for the companies. But as the market learned from Dangdang in December, too much of a share price increase for an IPO isn’t necessarily a good thing. In fact, some would say that the IPO underwriters for LinkedIn and Zipcar actually hurt the companies by undervaluing their initial offering.

But, as the case with Glencore, underpricing IPO shares slightly is one way underwriters look to attract more investors, which in turn could drive up share prices. Glencore recently confirmed its IPO price range to 530 pence per share from 480 to 580 pence.

Tech Bubble IPOs: Where Are They Now?

the IPOs of recent years are still no where near the levels of those during the tech bubble of the early 2000s.

Does anyone remember VA Linux? The company’s IPO saw shares rise as high as $320, over 1000 percent higher than its offering price of $30. The company has now evolved to become Geeknet (NASDAQ: GKNT), which has a market cap of $173 million. Some other notable IPOs from that era include. Exodus Communications, which jumped 637 percent but filed for bankruptcy three years after its IPO. Theglobe.com, whose share price jumped over 600 percent on its first day of trading but never justified the valuation, and eventually shuttered the business in 2008.

Of the 10 companies listed in the Los Angeles Times post, only three remain publicly traded with the rest either closing up shop or getting acquired. Geeknet, Akamai Technologies (AKAM) and Cacheflow–now known as Blue Coat Systems (BCSI)–are the only ones still publicly traded.

Foundry Networks (525 percent first day gain) was acquired by Brocade Communications (BRCD), webMethods (508 percent) was acquired by Software AG, Marketwatch (505 percent) is owned by NewsCorp (NWS), and FreeMarkets (483 percent) was acquired by Ariba (ARBA), and Cobalt Networks (482 percent) became an ill-advised acquisition by Sun Microsystems–which itself is now a subsidiary of Oracle (ORCL).

IPOs to Watch For

Aside from the big social media names, other industries also have highly anticipated or speculated IPO candidates as well. Two of the most anticipated public offerings are from theater chain AMC Entertainment and automaker Chrysler. Toy store giant Toys R Us and online backup storage provide Carbonite are two others the market is watching.

Whatever the case, it seems that the market’s excitement is targeted overwhelmingly on the internet space, and more specifically, in social media companies. Perhaps its because investors want to believe there’s more potential in these companies than there may actually be, and not fully understanding what they can and can’t do makes it that much easier.