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May 10, 2012 at 02:46 PM
When Facebook puts itself up for sale in its initial public offering, now scheduled for next Friday, May 18, it is expected to be the biggest IPO in American history. Facebook has said it expects to raise around $12 billion from the offering, although other estimates peg the proceeds at closer to $10 billion. But a look back at the ten biggest previous IPOs shows that simply raising billions in the market is no guarantee of long-term success.
See also: The Landscape for the Facebook IPO
The lower end of the estimates would put the offering at just about equivalent to the current record holder, that of AT&T Wireless. When AT&T spun off that part of its business in April 2000, it raised $10.6 billion, just as the highflying high-tech market of the 1990s was beginning its slide downward. AT&T priced its shares at $29.50, but by 2003, the stock was trading below $10. A merger with Cingular in 2004 was completed with a share price of around $15. (The current AT&T Wireless was created by AT&T in 2005 and is not part of the earlier company.)
[Photo credit: AP Photo/Eric Gay, file]
The experience of the AT&T Wireless IPO scared off Verizon, which had been planning to spin off its own wireless subsidiary. But it didn’t prevent Philip Morris from spinning off Kraft in an IPO the following summer, on June 12, 2001. Philip Morris kept 88 percent of the company and sold the rest, a far cry from Facebook’s plan to sell about 64 percent of its stock.
Initially, the Kraft IPO was slightly less spectacular than the AT&T Wireless IPO, raising $8.68 billion. But for the long term, it was much more successful: Despite bouncing along like most American stocks in the past decade, Kraft is trading in the upper 30s now, above its IPO price of 31. Philip Morris (then known as Altria) sold its Kraft stock to the public in 2007, and Kraft became one of the 30 companies in the Dow Jones industrial average in September 2008. That’s a success story Facebook would be happy to emulate, although Kraft was obviously a well-established corporation at the time of its IPO, and it’s hard to compare a spinoff to a company selling itself.
[Photo credit: AP Photo/Morry Gash, file]
The third-largest was another success story involving a well-known American brand: United Parcel Service. UPS leapt out of the gate on November 10, 1999, with an IPO priced at 50 a share, which shot up to 70 before the day was over. All told, the offering raked in $5.47 billion. Although the stock has been up and down since then, it’s now trading near 80.
[Photo credit: AP Photo/David Duprey, file]
The fourth-largest IPO was another spinoff: CIT Group, a bank holding group that does primarily business lending. It had been around under various ownership schemes since 1908 and was wholly owned by Tyco when 100 percent of the company was spun off in 2002. The take at the time was $4.87 billion, at an offering price of $23, which slipped to $22 on the first day of trading.
After a strong first five years, in which the share price more than doubled, CIT collapsed with the rest of the financial sector in 2007, and eventually filed for bankruptcy in 2009. All of its common and preferred stock was canceled as part of the bankruptcy. Again, this is not the trail Facebook hopes to follow.
[Photo credit: AP Photo/Mark Lennihan, file]
