Investing in internet initial public offerings could be “disastrous” for your wallet, according to new research tracking ten of the highest profile money-losing dot-com flotations. 


According to a report from Swiss research firm MyPrivateBanking which profiles the top ten largest, value-losing internet IPOs of the doctor era, 60 per cent of investors in these floats lost all or almost all of their assets invested in the float. 

In not one single case did investors, even over the long term, make any profit from the float. 



The results of the report rings alarm bells as now a new wave of internet company stock flotations gains interest from private investors, said Christian Nolterieke, managing director of MyPrivateBanking.Com. 


“Of course there have been successful Internet IPOs as well, but we see the risk-reward relationship as far too unpredictable and disadvantageous for private investors”, said Nolterieke.

“There is a substantial risk for investors that the mix of the same major players, mechanisms and promises that were seen in the last tech boom eventually leads to the same, disastrous results," he added.

Some of the high profile online firms catching the eyes of many wealthy investors include online networker LinkedIn, earlier this year, followed by RenRen, the so-called Facebook of China. This week social gaming company Zynga filed its prospectus to IPO, with analysts valuing it at as high as $10 billion. 

Web stocks are in fierce demand from the wealthy, as low risk high-yield products become increasingly thin on the ground. Facebook announced it would float earlier this year, underwritten primarily by Goldman Sachs. The US bank bought the rights to a $1.5 billion private tranche of the social networking company stock through a special purpose vehicle, which its rich clients will get exclusive access to.  

But Nolterieke warned that wealthy clients of the banks leading these IPOs should be on the alert if they are offered the chance to participate in IPOs orchestrated by their bank. It is common practice for the investment banking division and wealth management division of large banks to collaborate to distribute IPO stock among their wealthy individual clients. “For the investor, this is a somewhat risky investment and dubious practice,” said Nolterieke.


“A central role for the irrational exuberance of the dot-com bubble was played by IPOs for almost unknown companies with, relative to their valuation, little in the way of revenue or profits, if there were any profits at all”, said Steffen Binder, research director of MyPrivateBanking. “Looking at the balance sheets accompanying, in particular, the recent IPOs of social media ventures and Chinese Internet companies, we see a lot of similarities that should worry an investor.”

These similarities do not end with the sky-rocketing valuations. According to MyPrivateBanking Research, many of the investment banks that lead-managed issues in the dot-com bubble crop up again when looking at 16 of the most prominent Internet and social media IPOs since December 2010: Morgan Stanley is among the lead underwriters in 50% of cases; Deutsche Bank and Credit Suisse were part of the lead underwriters in 31% of cases; Goldman is among the lead underwriters in 25 % and BofA Merrill Lynch in 19% of the cases.

Below is a list of the top ten worst-performing high profile dot com IPOs, according to MyPrivateBanking.Com.

Top 10 High-Profile, Value-Losing Dot-Com IPOs