IPO Resurgence: Good News for Cash-Hungry Small Businesses
Get the working capital your business needs from Entrepreneur Lending, powered by CAN Capital. Learn More »It was a long, lonely year for the initial public offering market in 2009. Week after week went by with no new issues pricing...or only weird holding companies or major corporations based in China hitting the American public markets. Just 177 issues priced worldwide last year, compared with 554 IPOs in 2007.
But at last, the IPO doldrums seem to be ending. Data from Renaissance Capital's IPOHome shows seven IPOs priced in January, up from a big none in January 2009. There have been 13 new IPO filings this first month, up from two in the same period last year.
Why should you care? The IPO upswing is good news for lots of small businesses that are looking for money--and not just the ones thinking IPO.
Why? Because IPOs are such a popular form of cash-out for venture capitalists. The lack of IPOs meant fewer lucrative exits, and contributed to a record low in VC investments in small businesses last year with only about $17.7 billion, the lowest figure in a decade. Even 2008 saw nearly $28 billion in VC investment, data from the PricewaterhouseCoopers/National Venture Capital Association/Moneytree study showed. With the restart of IPOs as a possible exit strategy for investors, we should hopefully see venture capital flows rise again in 2010.
Last week, insurer Symetra Financial went public, among others. Coming this week are the planned IPOs of five U.S. companies in a variety of industries:
Ã¢Â€Â¢ Patriot Risk Management, another insurer, is the smallest IPO on the block for this week, seeking $214 million. It's a small-to-medium sized business: company sales are $33 million and it has 150 employees, its public filings show.
Ã¢Â€Â¢ Independent movie finance and production company Film Department Holdings is seeking about $439 million. Company is definitely small-bizville--has 22 employees and sales are $13 million.
Bigger companies trying the IPO route this week include FriendFinder Networks, which offers adult social networking, investment bank Imperial Capital, and drug-development firm Ironwood Pharmaceuticals. The appearance of smaller businesses in the IPO markets again is a big change that will hopefully help encourage more venture-capital investment in 2010.
One other factor that may help prime the IPO market this year--the companies that did go public last year saw their stock soar. Renaissance's IPO Index rose nearly 55 percent in 2009, results that should encourage stock investors to take a flier on new IPOs and strengthen this year's market.
With any luck, the IPO recovery will translate into growth in other forms of funding for small businesses in the coming year.
Are you interested in taking your company public? Or finding venture capital? If so, how do you assess the market today? Leave a comment and share your point of view.