Today's Coming Crisis Movie

Friday, July 27, 2012

Internet stock collapse dents Silicon Valley

(Reuters) - Social media companies, once hailed by their Silicon Valley boosters as world-changing businesses with limitless potential, are instead proving a sobering reminder of how investors can be seduced by Internet hype.

With few exceptions, the first wave of social media firms to trade on the public markets has delivered a disastrous performance that conjures memories of the dot-com bust of 2000.

"Farmville" publisher Zynga, which went public in December at a valuation of $7 billion, is trading around $3.15 a share, more than 68 percent off its $10 IPO price.

Daily deals site Groupon, touted as the firm that could reinvent local commerce, has fallen from its $20 IPO price to about $7.15 in nearly nine months. Music service Pandora Media has dropped from $16 at its June 2011 IPO to around $9.50 on Friday.

And on Thursday, the 800-pound gorilla of the group, Facebook Inc, reported tepid results that shaved some $10 billion off the company's market cap. The stock has gone straight down since its botched May initial public offering and now trades at around one-third off its $38 IPO price. Read More