As the prospect of Facebook's (FB) well-anticipated IPO comes ever nearer to becoming reality, the more closely correlated social companies may soon be expected to trade out of synch even more so with their own realities. Over the past year alone, numerous IPOs have come online and been given exuberant valuations as companies that have yet to prove themselves from a standpoint of a financial outlook. Indeed, these valuations appear to have been connected to the popularized mania surrounding the social industry's public face which has been spearheaded by an overwhelming anticipation led by Facebook.
Therefore, as Facebook moves ever closer to its IPO date, investors may wish to watch more carefully as the social sector moves ever closer in line on the basis of news coming out of Facebook. On Monday, April 23, Facebook made a surprise announcement that its quarter-to-quarter revenues slid in an overt sign of possible sector cooling. For an industry built on hype and sustained growth, such news spelled for dashed hopes across the board. On Tuesday, Yelp (YELP) fell 4.9% and Angie's List (ANGI) fell 2.5% on the news that might have otherwise seemed unrelated were it not by association with the social aspect of Facebook. Indeed, intra-day, the companies had fallen even lower with Yelp falling over 7% at one point.
Investors may wish to watch out for the following companies as Facebook approaches its IPO. Each has found its own success and share of difficulties since coming public in light of the market uncertainty surrounding their valuations. As a result, the following companies may continue to trade erratically on news more closely correlated to their peers than on news pertaining to their particular business model:
RenRen (RENN). In May 2011, RenRen raised $743 million in an IPO priced at $14/share. The Chinese social network company had often been referred to as the Facebook of China and was subsequently hit with a strong whiplash as the company's public life failed to live up to the hype. The company now trades at a market capitalization of $2.49 billion with a book value of $3.08/share. Analysts expect a loss of $0.04 for the year ending 2013, and the company currently trades at $6.32.
Yelp (YELP). In March 2012, Yelp held its IPO at the price of $15/share. The social rating company had surged over 63% by end of its first day with a closing price of $24.58. The company currently has a market capitalization of $1.27 billion with a book value of $1.83/share. Analysts expect an EPS of $0.06 for the end of 2013, and the company currently trades at $21.18.
Angie's List (ANGI). Popular paid-subscription rating service provider, Angie's List was quick to be met with popular demand as it faced its IPO in November 2011. The company raised $114 million through its IPO priced at $15/share. Despite increasing losses, the company continues to hold a rather lofty valuation, all things considered. The company now trades with a market capitalization of $813 million with a book value of $0.81. Analysts expect a loss of $0.37 for the end of 2013, and the company currently trades at $14.26.
Zynga (ZNGA). Gaming service Zynga has been closely connected to Facebook in light of its reliance on its social platform. The company held its IPO in December 2011, raising $1 billion having priced its shares at $10/share. The company trades with a current market capitalization of $6.21 billion with a book value of $2.42/share. Analysts expect an EPS of $0.36 by the year end of 2013, and the company currently trades at $8.60.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.