Looking for "likes"
Manchester United was hoping to place its shares at $16 to $20. Instead, the stock hit the market at $14 and barely budged during that first trading day.
Does that sound familiar? It should. The most prominent IPO of this year followed a similar trajectory. Facebook
The bigger they are, the harder they fall, or so the lesson seems to go. Outside of those two stocks, the IPO market has generally been vibrant over the past two years. Sure, there have been flops, but many companies have reaped the benefits of a market where many bulls still run free. On its first day of trading, business social-networking site LinkedIn
In terms of operations, LinkedIn is a little guy compared to a Facebook or a Man U. According to company figures, its site has around 175 million users worldwide. That doesn't touch the 659 million supporters of the footie team or the more than 950 million people who utilize Facebook. Yet LinkedIn's stock market success gives it an eight-figure market cap that puts it in league with the much more popular Facebook and handily beats that of Manchester United.
The bigger the firm, the heavier the disappointment
Such performance gives heart to the fundamental investors out there. It's hard to rebuff the fundamental point of view in the lackluster Facebook and Man U IPOs. The former's uninspiring results have been well-documented. In its crucial first set of quarterly earnings since going public, Facebook reported a net loss of $157 million and admitted it needed to do better selling ads for its mobile apps -- the company's current hot growth market.
As for the soccer team, Glazer's 2005 acquisition (for $1.47 billion -- still one of the highest price tags ever for a sports franchise) left it saddled with hundreds of millions in debt. That isn't an amount that melts away quickly or easily, and in the subsequent years, Manchester United's debt level has grown alarmingly.
The company managed to retire much of that, but according to its unaudited figures as of this past March, long-term debt was still high at 417 million pounds ($654 million). Cash, meanwhile, amounted to less than 26 million pounds ($41 million).
Man U is the bluest of blue-chip sports franchises, but the same can't be said of it as a corporate entity. Revenue has been growing, but the bottom line has been relatively thin or in the red these last few years, and the company is anticipating a loss for 2012.
It's the fundamentals
It's almost indisputable that healthier financials are how the little guys have been beating these giants at the IPO game of late. Look at a young up-and-comer like Spirit Airlines
But the company has been posting some nice financial numbers: Its 2011 revenue of $1 billion-plus was a 37% year-over-year improvement, while it posted a net profit, as is its habit (a rare habit, by the way, for the airline industry. Not surprisingly, Spirit's stock has soared 64% above its IPO price.
Another little engine that could is real-estate website Zillow
These positive aspects are largely missing in the recent histories of Facebook and Manchester United. They're big, famous companies, but fame and prominence also mean high expectations; people want the prospects to match the power. If those expectations aren't met, even the savviest underwriter in the world will find it hard to make the stock pop. It's not the size of the dog in the fight, as the saying goes; it's the size of the fight in the dog.
After the recent disappointment of its quarterly results, many say Facebook is oversold and deserving of a second look. Is this accurate? Our expert, in-depth analysis of the stock will help you decide for yourself. The report is $9.99 and includes one full year of free updates. This deal certainly deserves a "like." For more information and to buy, click here.
Fool contributor Eric Volkman owns shares of Facebook. The Motley Fool owns shares of Linkedin, Facebook, and Zillow. Motley Fool newsletter services have recommended buying shares of Facebook, Linkedin, and Zillow. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.