Could 'Low-Float' Initial Public Offerings Lead to Another Dot.com Bubble?

By Ed Silverstein June 10, 2011

Watching how LinkedIn limited the number of shares it sold in a recent IPO, other technology companies may also see that scarcity will cause a higher share value and possibly lead to a dot-com bubble, according to media reports.

Bloomberg News described the approach as a “low-float offering.” Pandora Media Inc. and Zynga Inc. are doing similarly, Bloomberg adds.

The demand for Internet companies and the shortage of shares could mean that the companies get higher valuations than they expected for the IPOs, Francis Gaskins, president of IPODesktop.com, told Bloomberg.

“You have people overly excited,” Gaskins said in a statement to Bloomberg. “It’s a supply-demand thing. There’s not that much supply, and there’s pumped-up demand.”

And by selling an amount which is lower than one-tenth of its shares, LinkedIn, Zynga and Pandora are offering less than half the typical amount, says Bloomberg.

LinkedIn’s shares more than doubled after the IPO, and the company was valued at $8.91 billion. In fact, LinkedIn increased 109 percent on its first day of trading, TechZone360 said.

Similarly, Groupon Inc. expects to sell a “small piece” of the company in its IPO, the company said. It could get a value of about $25 billion, Bloomberg said.

In addition, The Associated Press reported, in a story carried last month by TechZone360, that the market for IPOs has emerged from “a long drought.” Kathleen Smith, a principal at Renaissance Capital, projects that if companies continue to have IPOs at the current rate, over 200 companies would raise $50 billion in 2011.

“It would easily be the best year for IPOs since the Internet bubble popped,” The Associated Press adds.

"2011 could be the best year since 2000," Smith commented.

But there are many differences between the former dot.com bubble and where current tech companies are.

Companies having IPOs now are probably profitable, but before the companies were “promising” they would be profitable, The AP said.

Renaissance Capital said that “70 percent of companies that went public in the tech bubble were losing money. Today, 70 percent of companies that go public have already turned a profit,” according to The AP.


Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Rich Steeves

TechZone360 Contributor

SHARE THIS ARTICLE
Related Articles

Why Blockchain Could Be a Gamechanger

By: Paula Bernier    1/22/2018

Blockchain has become closely associated with the controversial topic of cryptocurrency. And that's fine because blockchain is an enabling technology …

Read More

Consumer Privacy in the Digital Era: Three Trends to Watch

By: Special Guest    1/18/2018

Digital advertising has exploded in recent years, with the latest eMarketer data forecasting $83 billion in revenue this year and continued growth on …

Read More

CES 2018: Terabit Fiber - Closer Than We Think

By: Doug Mohney    1/17/2018

One of the biggest challenges for 5G and last mile 10 Gig deployments is not raw data speeds, but middle mile and core networks. The wireless industry…

Read More

10 Benefits of Drone-Based Asset Inspections

By: Frank Segarra    1/15/2018

Although a new and emerging technology, (which is still evolving), in early 2018, most companies are not aware of the possible benefits they can achie…

Read More

VR Could Change Entertainment Forever

By: Special Guest    1/11/2018

VR could change everything from how we play video games to how we interact with our friends and family. VR has the power to change how we consume all …

Read More