Do Profits Matter for an IPO?

By: Liz Zuliani   Date: 28 April 2011

About The Author

Liz Zuliani

Diverse background in digital media, with experience working across large networks, to boutique

Liz Zuliani, EconomyWatch Contributor

 

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28 April 2011

As it turns out, no - not really. Zipcar IPO’d with a valuation of about US$1 billion. The company hasn’t turned a profit in two years. When it comes to IPOs for unsuccessful companies, it turns out profits don’t really matter in the short run. At least not for technology companies. Though Zipcar is not a technology company.

Unprofitable technology companies find themselves hotter than profitable companies – then drop off the radar over time giving back position to companies that do turn profits.

IPO Dashboard analyzed 100 public software companies, and adjusted the data for the period in which the company IPO'd: "All of the returns in the study have been NASDAQ adjusted. This means that the returns shown above are those in excess of the return on the Nasdaq index. This is a way to control for general technology market conditions."

Chart and story from Business Insider:

CHART OF THE DAY: What Happens When An Unprofitable Company IPOs? Read more: http://www.businessinsider.com/chart-of-the-day-ipos-2011-4?utm_source=Triggermail&utm_medium=email&utm_term=SAI%20Chart%20Of%20The%20Day&utm_campaign=SAI_COTD_041411#ixzz1KmKK57CN

 


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