2012 To Be Biggest Internet IPO Year Since '99
Facebook Inc. and Yelp Inc. are set to lead the biggest year for U.S. initial public offerings by Internet companies since 1999, testing demand for IPOs after investors lost money on Zynga Inc. and Pandora Media Inc.
Context & Ripple Effects
The pipeline behind this story has been building all year: BoomTown flagged the next wave of web IPOs back in February, Facebook's disclosed numbers fed the IPO outlook by May (Facebook Numbers Feed IPO Outlook), and Zynga filed for a $1 billion IPO in July. What changed by late December is the reception: both Zynga and Pandora left IPO buyers underwater, confirmed losses that hang over the whole 2012 calendar.
Bloomberg's framing is that Facebook and Yelp now carry the burden of proving retail and institutional demand exists at all — a 1999-scale class of deals arriving immediately after the two most visible 2011 consumer-internet debuts disappointed their new shareholders.
First-order effects
- Facebook and Yelp's bankers must price into a market where the last two marquee consumer-internet IPOs (Zynga, Pandora) traded below offer, compressing the premium they can charge for growth.
- Yelp, as a smaller deal riding in Facebook's slipstream, gets its window only if the anchor offering sustains appetite for ad-driven consumer names.
Second-order effects
- Other late-stage consumer-web companies weighing 2012 filings will time or shelve them against how Facebook trades, making one stock effectively the gatekeeper for the entire cohort.
- Underwriters face pressure to leave more money on the table — lower pricing and bigger allocations to institutions — to avoid a repeat of the Zynga and Pandora first-day losses that poisoned sentiment.
Third-order effects
- If the Facebook-led class prices well, 2012 re-establishes the public markets as a viable exit for consumer internet and pulls private-market valuations back toward public comparables; if it repeats the Zynga-Pandora pattern, companies stay private longer and the IPO window narrows to proven cash flows.
- A 1999-scale volume year concentrated in a handful of anchor names points toward an IPO market where index-level outcomes are decided by one or two bellwethers rather than breadth across the sector.
The trend: Consumer-internet companies are clustering into a single 2012 IPO window whose viability rests almost entirely on whether Facebook can price and trade well after Zynga and Pandora burned their debut buyers.