Yelp IPO. Zillow IPO. Howardlindzon: The web leaders are doing... L026: Tech IPOs Are a Bust -- and Why That's Awesome! - Launch - By Jason Calacanis The IPO market for tech companies in web 1.0 was a disaster for the public because the companies failed to become businesses half the time. In fact, they went public so early they were a riskier buy than the incoming class at Y Combinator or TechStars (really).
The current tech IPO market -- let's call it IPO 2.0 -- has turned out to be a disaster for retail (a.k.a. public) investors for the opposite reason: these companies are too successful. So successful is this crop of companies that their potential gains over the next couple of years have already been priced into the stocks. Smart trades in LinkedIn, for example, occurred between 2009 and 2010 on SecondMarket, not on the stock market for the past couple of weeks. If you bought this amazing, amazing company -- which we love -- in the private market last spring, you got in at a billion-dollar market cap.
LinkedIn's $124 peak price has crashed almost in half, closing at $68 yesterday. Pandora: Awesome service! The US IPO cartel. Mark Abrahamson, Tim Jenkinson, and Howard Jones, of Oxford University, have an utterly compelling paper out proving that there’s collusion among investment banks in the US — it doesn’t matter whether they’re European or American banks — to keep IPO proceeds set at 7%. Using a very high-quality new dataset, they compare US and European IPOs, and get the following result: This chart just shows IPO fees for deals between $25 million and $100 million (in 2007 dollars). But the pattern is universal: Between 1998 and 2007, 95.4% of U.S. IPOs between $25m and $100m had gross spreads of exactly 7%.
The comparable figure between 1989 and 199… While Chen and Ritter showed virtually no IPOs over $150m with a 7% gross spread, we find that 77% of all offerings between $100 and $250m charge exactly 7%.European IPO fees do not cluster, and only 1% of offerings raising $25m or more experience gross spreads as high as 7%. The cost to issuers of this collusion is huge: It’s No Joke. IPOs Are Back, Baby: Tech News and Analysis « Fourteen venture-backed companies went public in the first quarter of 2011, raising $1.4 billion in the process, according to the National Venture Capital Association. That’s the highest number to go public in a quarter since 2007. While only seven of these companies were in the Internet and technology fields (the rest were in medical and biotechnology), the more interesting data was on mergers and acquisition amounts, which were awesome for Internet-related businesses and pretty grim for hardware and semiconductors (see chart below). In other words, it’s still all about the software.
The NVCA reports that during the first quarter there were 74 M&A deals with a disclosed total dollar value of $3.3 billion. Computer software and services and Internet-specific companies accounted for the bulk of the targets, with 63 deals and the lion’s share of the disclosed value, leaving a measly three semiconductor deals and four hardware deals. Note to Self: If the Halls Clear at Conferences, IPOs Are Near. In Silicon Valley the terms of venture capital deals, the prices of valuations and the real stories of ousters are routinely dished, whether they always show up in the press or not.
Sure it’s all off the record or on background or whispered at a coffee shop, but people who live here love what they do and when companies and valuations grow this quickly, it’s hard to keep the juicy details under wraps. So when they can’t dish, what do they do? Hide. No one wants to mess with the Securities and Exchange Commission. The Greylock partners– four of them were here– were all conspicuously absent the last few days. Andrew Mason was supposed to sit down with us after his fireside chat, then suddenly had to leave immediately. It’s tough days to be a tech reporter trolling the halls for news, when the newsmakers vanish.
So who was visible in the hallways this week?
Groupon IPO. Pandora IPO. Kayak. Yandex IPO. Linkedin IPO. Facebook IPO.