Echoing the dot-com boom a decade ago, a wave of Internet companies with lots of buzz but shaky business models went public this year. Here's how they've held up.
IPO date: January 26
IPO price: $17
Now trading at: $8.06
Revenue for first 9 months of 2011: $240 million
Loss for first 9 months of 2011: $15 million
Demand Media's January IPO kicked off 2011 with a pop. Shares of the online content creator closed 33% higher on its debut day, valuing the company at more than $1.5 billion.
It was a surprising debut, considering the criticisms that plagued Demand's road to the stock exchange. Demand CEO Richard Rosenblatt had insisted for years to media outlets including Fortune that his company was profitable. But in its IPO filing in August 2010, Demand disclosed that it was more than $6 million in the red for the year so far. It posted a net loss of $22 million in 2009.
Demand also faced criticism of its unorthodox accounting methods. Demand doesn't expense the cost of paying its writers upfront, as content companies typically do. Instead, it spreads those costs over five years, which boosts its bottom line.
Analysts marveled at the content churned out -- "It was amazing. They literally wrote 2 million articles in a year," an analyst commented to Fortune last month -- but Demand's method isn't working as well as it once did. In February, Google rolled out a change to its algorithm that pushed articles like Demand's lower in search results.
Demand stock managed to hold around its highs for the first quarter of the year, but it's been a sharp and steady decline ever since. Shares have lost more than 65% far in 2011.
IPO date: May 19
IPO price: $45
Now trading at: $69.95
Revenue for first 9 months of 2011: $354 million
Profit for first 9 months of 2011: $5 million
LinkedIn shares nearly tripled in early public trading and ended their first day at $94.25 -- more than double LinkedIn's $45 IPO price.
Investors initially didn't seem concerned that until last year, the company was in the red almost every year since its 2003 inception. (In 2006, it turned a slight profit on sales of $32 million.) But shares began dropping in May, and by June 20 LinkedIn was below $64 a share.
A July spike took shares back to nearly $110, but they took another dive in late November when LinkedIn insiders began unloading shares. IPOs typically come with "lockup" agreements preventing employees and early investors from unloading their stakes; LinkedIn's expired on November 20. A few days earlier, LinkedIn revealed that its early investor Bain Capital planned to dump its entire $275 million stake.
LinkedIn shares fell sharply the week after its lockup period expired.
An analyst report from Trefis.com called that decline "an implicit acknowledgement that perhaps LinkedIn really is over-valued." Trefis's analysis set a LinkedIn price target of $43 a share -- sharply below the current price.
IPO date: June 15
IPO price: $16
Now trading at: $11
Revenue for 9 months ended 10/31/11: $168 million
Loss for first 9 months ended 10/31/11: $12 million
Pandora's IPO paperwork warned investors that it expected to continue losing money "through at least fiscal 2012." But demand still seemed high -- so after Pandora set a target price range of $7 to $9 per share in June, it quickly upped the range to $10 to $12 per share and eventually priced at $16.
Noted analyst Rich Greenfield of BTIG panned the Pandora IPO before it even happened, writing in a note to clients: "As consumers we love Pandora [but] investing in Pandora is a whole different story." He had concerns about Pandora's audience reach and its profitability, and recommended that investors take a pass.
When the stock began trading on June 15, it initially shot up 63% to $26. But trading cooled as the day went on, and shares closed near the day's low, at $17.42.
Pandora's stock fell 20% in July and 12% in August, then began clawing back a bit in September and October.
On November 23, Pandora reported that it earned 2 cents per share on a non-GAAP basis, excluding stock-based compensation expenses. That beat analysts' expectations of a 1-cent loss. But forecasts for next quarter came in lower than expected, and shares dropped 11% that day. Overall, Pandora's stock lost more than 33% in November.
IPO date: July 20
IPO price: $20
Now trading at: $23.08
Revenue for first 9 months of 2011: $46 million
Profit for first 9 months of 2011: $178,000
Like many of its peers, real estate site Zillow.com has a river of red ink. When Zillow filed for its IPO in April, it revealed that its revenue jumped 74% in 2010 to $31 million, but it lost nearly $7 million that year.
Zillow's stock quickly shot up 120% in its July debut and ended the day 79% higher. But Zillow's IPO comes at a rocky period for the housing sector, which has yet to stage a sustained recovery. Shares have swung back and forth in the four months since its debut, alternating from sharp losses one month to modest gains the next. Zillow stock lost 25% in November, but it's still above its IPO price.
IPO date: November 4
IPO price: $20
Now trading at: $19.04
Revenue in trailing 12 months: $1.3 billion
Loss in trailing 12 months: $574 million
Groupon -- hailed by Forbes as "the fastest growing company ever" -- was controversial even before the daily deals site filed its paperwork to go public. Business owners have loudly complained that doing business with Groupon isn't worth it, and the barriers to entry into the group coupon business are so low that Groupon needs to maintain an expensive marketing campaign to lure customers to its service instead of one of a dozen competitors.
Once Groupon did disclose its financials in its IPO filing, the situation got even worse. The company was barraged with criticism for unorthodox accounting measures, which led to several downward revisions of its financials. Those restatements effectively cut Groupon's reported sales in half, to $688 million for the first half of 2011, down from the $1.5 billion it claimed previously.
Despite all that, Groupon shares soared 30% on the stock's first day of trading, at one point topping $31 a share.
But the hype was short-lived. Groupon shares are down more than 27% since their debut last month -- they now trade around $1 below the IPO price. How's that for a deal?
IPO date: November 17
IPO price: $13
Now trading at: $13.63
Revenue in trailing 12 months: $31 million
Loss in trailing 12 months: $51.4 million loss
At the ripe age of 16, local business review site Angie's List is much older than most of the Internet companies that have recently gone public. But like many of its younger, IPO-ing peers, Angie's List is not profitable.
The company's IPO paperwork revealed that in 2010, it had a $27 million net loss on sales of $59 million. For the first nine months of 2011, the company logged a $43 million loss.
Shares gained 25% in their debut on November 17, but Angie's hurting as this year's warm and fuzzy environment for tech IPOs begins to fizzle. The stock is down 16% after less than two weeks on the market.
Two other buzzy Internet names have filed for their IPOs and will soon debut: Zynga and Yelp.
Farmville maker Zynga filed its paperwork in July and initially aimed to start trading in November. But November came and went without a peep. Zynga ended up setting a target price range of $8.50 to $10 a share earlier this month and is poised to begin trading soon.
Reviews site Yelp filed just last month to raise up to $100 million in a public offering. Yelp, like many of its 2011 IPO predecessors, is not profitable.
Of course, the Holy Grail of tech IPOs is Facebook: The social network is expected to file its paperwork sometime in 2012.