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Chart-Topping Pops: Statistics on the Internet Bubble

As the pace of initial public offerings (IPOs) quickened during the Internet bubble, perhaps the most salient feature was the "pop," or the price differential between a stock's offering price and its closing price on the first day of trading. When the bubble burst in the spring of 2000 -- and an estimated $4 to $6 trillion of shareholder wealth evaporated -- it became clear that the enormous first-day pops of the stocks had given companies a lot of publicity, but not much more. "What is the reason that you have an IPO?" asks Joe Nocera of Fortune magazine. "It's to put money in the coffers of the [issuing] company. That's the reason you do it. When you have a situation where it's going up 300 percent on the first day, that's 300 percent that the company is not getting. It's going into the pockets of investment professionals. ... They don't care if the company goes out of business the next day, as long as they can flip their IPO and take their profit. The dereliction of duty that went on here is just appalling."

Here are some statistics on average first-day returns during the 1990s, and the top pops of the Internet bubble.

· Average first-day returns and money left on the table
Note: this data is for companies with an original offer price of $8 or more

Year


Number of IPOs


Avg. First-Day Return


Aggregate Amt. Left on the Table


1990


89


9.46%


$0.30 billion


1991


250


11.37%


$1.39 billion


1992


338


9.87%


$1.65 billion


1993


437


11.64%


$3.12 billion


1994


319


8.56%


$1.37 billion


1995


366


20.38%


$4.16 billion


1996


572


15.99%


$6.45 billion


1997


391


13.80%


$4.22 billion


1998


267


21.76%


$4.95 billion


1999


446


70.89%


$35.20 billion


2000


333


57.29%


$26.69 billion


2001


78


14.15%


$2.97 billion


Source: Jay Ritter (University of Florida), "Some Factoids About the 2001 IPO Market"

· Top Ten First-Day "Pops"

Company


Offer Date


Offer Price per share


First-Day Closing Price per share


Number of Shares Offered


Percentage increase


Closing price
per share
on 1/16/01


VA Linux


12/9/99


$30.00


$239.25


4,400,000


697.50%


$2.48


theglobe.com


11/13/98


$9.00


$63.50


3,100,000


606%


$0.045


Foundry
Networks


9/28/99


$25.00


$156.25


5,000,000


525%


$7.98


Webmethods


2/11/00


$35.00


$212.62


4,100,000


507.50%


$22.58


FreeMarkets


12/10/99


$48.00


$280.00


3,600,000


483.33%


$20.00


Cobalt Networks


11/05/99


$22.00


$128.125


5,000,000


482%


acquired by
Sun Microsystems
in 12/00


Marketwatch.com


1/15/99


$17.00


$97.50


2,750,000


474%


$4.00


Akamai Technologies


10/29/99


$26.00


$145.1875


9,000,000


458%


$4.76


Cacheflow


11/19/99


$24.00


$126.3750


5,000,000


426.56%


$2.26


Sycamore
Networks


10/22/99


$38.00


$184.75


7,457,000


386%


$4.83


Source: Jay Ritter (University of Florida), "Big IPO Runups of 1975-2000"; Hoover's Online

· Number of IPOs which doubled in price on their first day of trading

Fiscal Quarter


Number of IPOs


1997 (1Q)


0


1997 (2Q)


2


1997 (3Q)


0


1997 (4Q)


0




1998 (1Q)


0


1998 (2Q)


2


1998 (3Q)


3


1998 (4Q)


7




1999 (1Q)


19


1999 (2Q)


24


1999 (3Q)


26


1999 (4Q)


48




2000 (1Q)


48


2000 (2Q)


9


2000 (3Q)


19


2000 (4Q)


1




2001 (1Q)


0


2001 (2Q)


0


2001 (3Q)


0


2001 (4Q)


0


Source: Jay Ritter (University of Florida), "Some Factoids About the 2001 IPO Market"

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