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What would the economic impact be if Groupon or Facebook collapses after their massive upcoming IPOs
Not to play devils advocate here but what if these companies aren't really worth what they are being valued at? Are they too big to fail? Are these companies that the government would be forced to bail out?
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4 Answers
If Groupon collapses after its possible IPO, I think the economic impact would be "that was expected".
If Facebook collapses 6-18 months after its IPO, I think it would send quite a chill across the entire technology sector. If it collapses 4-6 years after its IPO, I think that would generally be explained as "social media technologies shifted, and Facebook didn't make the transition" just like MySpace and Friendster before them.
There is zero chance the US Government would ever consider bailing out either organization.
I agree with Dan on all three of his points.
Frankly, if Facebook failed, I think there'd be a noticeable economic impact as productivity improved for a sizable portion of the workforce. :)
Of course, that would only last until they drifted off to some FB replacement...
These organizations are not in the "too large to fail" group because they are not tied to critical parts of the economy, nor would their demise have the same psychological impact as banks, financial institutions and the manufacturing sector.
Well, we'd all have to start remembering our friends' birthdays manually, for starters. The calendar industry would surge.
I don't think it'd be very significant. Facebook isn't a primary driver of internet advertising models like Google is, and Groupon has about forty competitors ready to fill the void.
On an investment level, it'd probably scare people away from tech IPOs for another decade, and we'd see more buyouts and consolidation. Maybe. Overall, I doubt there'd be much to be concerned about.
The economic impact of a failed IPO would be negligible. But you would have to ask yourself why it failed. If it was because the economy was in decline, then an IPO failure would add fuel to the decline in the stock market. But if it was because the underwriters mispriced the IPO, then only the participants in the deal would get burned.
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