As the euphoria surrounding the company's IPO dissipated, Yelp shares… (Spencer Platt / Associated…)
The euphoria surrounding a red-hot initial public offering often doesn’t last long. Investors in Yelp Inc. may be discovering that.
Shares of the Internet-review site declined nearly 15% on Monday, an about-face from their sizzling 64% surge on the company’s first day of trading Friday. Yelp slid $3.59 to $20.99.
It’s common for IPO shares to cool down in the aftermath of a blistering IPO, and is not necessarily a bad sign for the long-term prospects of a company or a stock.
Still, it’s a reminder that investors who buy in on an IPO’s first day can get hit hard, at least in the short-term. An investor who purchased Yelp at its $26 peak Friday already has lost more than 19%.
Those lucky enough to snag the $15 IPO price still have a comfortable gain.
It can take awhile for investors to reclaim their first-day peaks. The performance of several recent social-media IPOs illustrate that.
Online game maker Zynga Inc. has easily outdistanced its opening-day peak in December. But LinkedIn Corp. remains 30% below the heights it scaled in May, while Pandora Media Inc. is down 44% from its debut in June.
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