A fair amount has already been written about the fact that since the recent IPO, content delivery network Limelight (NASDAQ: LLNW) has dropped sharply in price. In about three months, the stock has gone from $24.33 to $7.91.
But, how could something like this happen? In some ways it is, to used an abused phrase, a perfect storm of events.
The market has assumed that content delivery networks are part of the wave of the future. The largest one, Akamai (NASDAQ: AKAM) had been a victim of the internet bubble. In December 1999, the shares were at $345 on the assumption that broadband would open a huge need for storage and moving content around the web. When the market collapsed, Akamai's shares were as low at $0.70.
But, because Akamai did hold on until the YouTube wave of online video streaming hit, its shares went from $11 in early 2005 to $50 last month.
Limelight, and one of its largest investors, Goldman Sachs (NYSE: GS) decided to cash in on the excitement around Akamai, and took the smaller company public. Certainly the IPO would be popular because of the tremendous excitement around audio and video streaming as companies including the TV networks and studios put their content online.
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