IPO Drought to Continue Well into 2009
When the economy is healthy and money is flowing freely investors become acquainted with fresh IPOs (Initial Public Offerings) every month. Here in 2009 though the economy is torn and venture capital is scarce.
Just how many IPOs are being prepared? Try only 31 deals planned for the first half of 2009.
From Fortune:
As the economy chilled in 2008, the number of companies that went public froze. The last U.S. deal to hit the market, Grand Canyon Education, brought in $144 million last November. It was the only IPO in the fourth quarter, a dismal end to 2008, during which the number of IPOs declined 83% from 2007 to 43.
The current drought is the second-longest on record, and the number of withdrawn or postponed IPOs increased 62% to 120 in 2008 from 74 deals in 2007, according to data tracker Dealogic.
Despite some optimism from the federal economic stimulus package in Congress, the IPO outlook for 2009 remains bleak. According to Dealogic, just 31 deals are looking to raise $7.5 billion in the current 180-day SEC registered backlog. At the same time last year, 146 IPOs expected to raise $43.7 billion.
The reason more companies are not trying to go public during these times is because of valuation. In healthy market conditions the ability to raise funds is far easier. With the IPO game the more money raised the better off the stock will start out of the gate.
More importantly the overall stock market weighs on new issues just like any other company. With three out of four stocks following the overall market trend, a bear market is a tough place to be placing bets on fresh stocks.
Source:
Investor Daily: 2009 IPO Outlook
Lawrence Delevingne, Fortune
Yahoo Finance, February 5, 2009, 1:29 pm EST
