It wasn't so long ago, in 2005, that cheap credit flowed like vino and venture capitalists and private equity firms had a clear path to riches--by selling shares in their portfolio companies on the open market. That year saw 30 initial public offerings (IPOs) in the U.S.
The Great Recession blew a gaping hole in those dreams. In 2008 and 2009 the combined number of IPOs barely sniffed 140.
Now, as the stock market furiously gyrates, the IPO market is finally showing some signs of life. The technology world is fairly simmering. On June 29 Tesla Motors, maker of electric sports cars, raised $226 million in an IPO. Other likely candidates for stock tickers: Zipcar, Nielsen and NXP Semiconductors, a unit of Royal Philips Electronics.
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An IPO can transform a promising yet modest company into a marquee name. Or it can signal the beginning of the end. We went hunting for lessons in the rubble and unearthed the 10 companies that raised the most money on their IPOs only to then fall into bankruptcy in less than a decade.
A few of the fallen were offshoots of larger companies. Some emerged to fight another day, while others sold off their assets. All were woefully ill-prepared when the economy soured. Here are five post-IPO problem children:
This Tyco spin-off was one of the biggest--and fastest--corporate flameouts, and also one of the quickest to recover. In 2002 the lender to small and midsize companies raised $4.6 billion in its public offering. But it lived on commercial paper (short-term debt), which supplied the money it lent to thousands of small businesses at a higher rate. Six years later demand for commercial paper all but dried up in the credit crisis, delivering CIT a mortal blow and resulting in a $2.3 billion taxpayer-funded bailout. In November 2009 CIT entered bankruptcy. It emerged 38 days later.
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