When we began this blog, we decided to review a large sample of successful technology companies to answer this question: Do software IPOs beat the market?
Today we have a new wave of technology companies–particularly those whose business hinges around being social. So why not ask the same question of them: Do social media IPOs beat the market?
The answer is mixed. Social Media IPOs do beat the NASDAQ, and sometimes by almost 30%. That is, until the company has been public for 5-6 months and suddenly the NASDAQ looks like a safer investment. A few exceptions, notably LinkedIn, Zillow and Bankrate continue to outperform the market, though for the most part not at the rate they once did.
If you’re in the market for a quick buy and sell, then social media companies seem like a stronger pick. Anything remotely long-term though, and they seem to quickly lose their lustre.