CHART OF THE DAY: What Happens When An Unprofitable Company IPOs?

button more charts
button chart prev
button chart next

Zipcar IPO’d today with its shares popping 56%, giving it a valuation of around $1 billion. It’s a nice start on the public markets for a company that didn’t turn a profit for the last two years.

But, do profits really even matter for an IPO? The chart below, which comes from IPO Dashboard, suggests that in the short run profits don’t matter, at least not for technology companies. (Arguably, this doesn’t apply to Zipcar, which is hardly a tech company.)

As you can see, unprofitable technology companies have traditionally shot out of the gates hotter than profitable companies. Over time they fade and the profitable companies end up a stronger stock.

IPO Dashboard analysed 100 public software companies, and adjusted the data for the period in which the company IPO’d: “All of the returns in the study have been NASDAQ adjusted. This means that the returns shown above are those in excess of the return on the Nasdaq index. This is a way to control for general technology market conditions.”

The chart is from a 2009 post, but we saw First Round Capital’s Charlie O’Donnell tweet it today, and in light of Zipcar’s IPO thought it was interesting enough to run.

chart of the day IPO

Follow the Chart Of The Day on Twitter: @chartoftheday

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at