Do Social Media IPOs Beat the Market?

by Daniel Hom on March 15, 2012

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.

{ 2 trackbacks }

Social Media, Lock-up Periods and the NASDAQ
March 29, 2012 at 10:35 am
How Bad is Facebook’s Stock Run?
June 8, 2012 at 10:50 am

{ 3 comments… read them below or add one }

Roger March 16, 2012 at 1:12 pm

I heard that a lot of startup IPOs usually take a hit around the 5-6 month mark – when VCs cash out.

Daniel Hom March 19, 2012 at 1:56 pm

Interesting point. I have data on several social media stocks around the ending of their lockup periods and it might be relevant to plot that against the above data now.

www.petrescueofmercer.org June 16, 2013 at 7:55 pm

Hi, just wanted to tell you, I liked this post. It was practical. Keep on posting!

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