Chris O'Brien, columnist for the Mercury News and their affiliated website SiliconValley.com provides his take on the 2011 year for IPOs and then comments on some proposals to make the path to IPO a bit easier. Worth a read. Here's the link: http://www.siliconvalley.com/chris-obrien/ci_19732103
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There's a short interview in yesterday's Venture Capital Dispatch with Todd Chaffee, General Partner of Institutional Venture Partners, where he discusses IPOs, valuation and exits. It's a short read, but has some good nuggets in it. Here's the link: http://blogs.wsj.com/venturecapital/2012/01/10/with-promising-portfolio-ivps-chaffee-takes-the-long-view/
There's a good post today on peHUB.com by Mark Boslet analyzing the 2011 results for venture-backed IPOs and M&A. His conclusion: not a great year, but above average, and it could have been a lot worse. The post is worth a read. Here's the link: http://www.pehub.com/130904/venture-backed-ipo-ma-markets-might-be-best-thought-of-as-above-average-in-2011-slideshow/
There's an interesting post on peHUB today that features an interview with David Weild, a former vice chairman of Nasdaq, about reviving the market for initial public offerings of small cap companies. Weild believes that an important element of this revival would be the re-establishment of trading spreads for small cap companies. It's an interesting interview and worth a read. Here's the link: http://www.pehub.com/130811/group-to-push-for-%E2%80%9Ccustomized-spreads%E2%80%9D/
SiliconValley.com, the tech news site of the Mercury News, yesterday posted a column entitled "Experts agree: 2011 was a lousy year for stock IPOs." The article discusses the venture-backed IPO activity during the year and offers some interesting facts, such as that 20 of the 52 IPOs were by companies in California. Worth a read. Here's the link: http://www.siliconvalley.com/ci_19668406
The National Venture Capital Association (NVCA) today announced that in 2011 there were 52 venture-backed initial public offerings (IPO) and 429 reported venture-backed mergers and acquisitions (M&A). IPO volume was down 31% from 2010 and M&A transaction volume was down 2% from 2010. Here's a link to the press release: http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=838&Itemid=93
The Wall Street Journal has an article discussing the Facebook IPO expected in the first half of 2012 and which bank, Goldman Sachs or Morgan Stanley, will win the coveted "lead" banker role. Good reading. Here's the link: http://online.wsj.com/article_email/SB10001424052970203686204577116823321665502-lMyQjAxMTAxMDIwOTEyNDkyWj.html
Venture capital investors in Facebook include Accel Partners, Andreessen Horowitz, Elevation Partners, Founders Fund, Greylock Partners, Kleiner Perkins Caufield & Byers, Meritech Capital Partners, Millennium Technology Value Partners and Technology Crossover Ventures. GoGo Wireless, the in-flight wifi provider, filed for its initial public offering today. Investors in GoGo include private equity firm Ripplewood Holdings.
SEC S-1 filing: http://www.sec.gov/Archives/edgar/data/1537054/000119312511351260/d267959ds1.htm Interesting article posted a while back from Matt Krantz of USAToday.com about what the first day of trading for an IPO tells investors. Here's the link: http://www.usatoday.com/money/perfi/columnist/krantz/story/2011-10-05/ipos-first-trading-day/50674710/1
2011 was a bad year for IPOs, according to an article in USA Today. Here's the link: http://www.usatoday.com/money/perfi/stocks/story/2011-12-22/bad-year-for-ipos/52170080/1
While I agree that 2011 didn't live up to expectations, it could have been worse. I'm hopeful that 2012 will be a better year for the global economy, the stock markets and IPOs. Happy Holidays! Many bulge-bracket investment banks offer private wealth clients the opportunity to invest in funds managed by a bank that in turn invest in hot private companies (such as Groupon and Zynga) prior to the initial public offering. Andrew Ross Sorkin recently posted an article on NY Times DealBook that discusses how investment banks can profit from these types of investments. Essentially, through these bank-managed fund investments, the banks already have an investor relationship with the company, which may help secure a lead manager role in the company's IPO. Interesting article worth a read. Here's the link: http://dealbook.nytimes.com/2011/12/19/two-ways-for-banks-to-win/ Zynga priced its IPO at $10 per share, started trading at $11 per share, but closed below its IPO price at $9.50 on its first day of trading. Why did Zynga break its IPO price? Based upon various reports, there are several reasons why this might have happened:
Valuation / Offering Size and Price. Some reports have indicated that Zynga's IPO valuation, at a $7 billion market capitalization, is too high. While this valuation was lower than some estimates, perhaps the market felt that this was still too high. Other reports felt that Zynga should have sold less shares in its IPO (it sold 100 million shares), raising less money, but creating a supply-demand imbalance that would have driven the stock price up on the first day. Zynga sold 14% of its outstanding shares in its IPO, which is a smaller amount than the usual 20% to 30% that is sold in an IPO. Some felt that if Zynga sold only 10% of the company in the IPO, the stock price would have shot up. I'm skeptical of the long-term effects of this type of "low-float IPO" strategy, as it is retail investors that drive the stock price up in these offerings, and once the retail exuberance wears off, the stock price can come crashing down. Business Model Concerns. While Zynga is profitable, one report suggests that recent profitability may have come from accounting changes and that the company may only have been near breakeven otherwise. In addition, Zynga obtains the vast majority of its revenue from Facebook, and hasn't to date developed its revenue-generating business significantly beyond the Facebook platform. Finally, Zynga profits from only 3 percent of its players that purchase virtual game pieces, and the growth rate of bookings is slowing. Stock/Voting Structure. Zynga has a three tier stock structure, where Marc Pincus has 70 votes for every one share he owns, other insiders have seven votes for every one share they own, and public stockholders have one vote per share they own. This translates to Mark Pincus and other insiders having voting control over the company. The argument for insiders having this much voting control is to allow management to focus on long-term shareholder value and not be worried about short term stock price swings. The argument against it is that the management may not be able to handle the growth and would need to be replaced, which would be impossible to do if they control the company. Market Factors / Market View of Social Gaming. Some reports suggest that given the volatility in the markets, investors are becoming more wary of social gaming. Sources: Reuters: http://www.reuters.com/article/2011/12/16/zynga-idUSL1E7NGPQ20111216 VentureBeat: http://venturebeat.com/2011/12/17/why-did-zyngas-stock-tank-on-day-one-analyst-cites-red-flags/ NY Times DealBook: http://dealbook.nytimes.com/2011/12/16/zyngas-modest-debut/ Wall Street Journal: http://online.wsj.com/article/SB10001424052970204466004577102371445084982.html?mod=googlenews_wsj 24/7 Wall St.: http://247wallst.com/2011/12/15/zynga-ipo-prices-great-offering-lousy-voting-rights-znga/ Zynga, which prices its initial public offering last night at $10.00 per share, is now trading at around $9.50 per share. The stock price opened at $11.00 and peaked at $11.08 before falling below the $10.00 IPO price.
Zynga sold 100 million shares at $10.00 per share, for a $1 billion IPO. Venture Capital investors include Kleiner Perkins Caufield & Byers, Institutional Venture Partners, Foundry Group, Avalon Ventures and Union Square Ventures. Zynga has prices its initial public offering at $10.00 per share, at the top of the $8.50 to $10.00 range, according to reports. The company's shares are set to begin trading tomorrow morning Zynga sold 100 million shares in the IPO, raising $100 million. Venture Capital investors include Kleiner Perkins Caufield & Byers, Institutional Venture Partners, Foundry Group, Avalon Ventures and Union Square Ventures.
Here's a link to a story at WSJ.com (firewall): http://online.wsj.com/article/SB10001424052970203893404577099293401936570.html?mod=WSJ_hp_LEFTTopStories A recent post to SeekingAlpha by Mazen Abdallah entitled "Beware Insider Selling in 'Small Float' IPOs" explores the impact of lockup expirations on the stock price of "small float" IPOs. Typically, roughly 20% to 30% (in my experience) of the company's shares are sold in an IPO. In a "small float" IPO, the amount of shares sold in an IPO is reduced (often between 10-15% in my experience) to create a supply-demand imbalance of too few shares and too much demand, typically resulting in a big first-day price increase. Mr. Abdallah explores what happens to these "small float" IPOs 180 days later when certain insider trading restrictions lapse and a large amount of shares becomes eligible for sale, reversing the supply-demand imbalance to too many shares and too little demand. Interesting reading.
Here's the link: http://seekingalpha.com/article/313611-beware-insider-selling-in-small-float-ipos Jive Software Inc. has priced its initial public offering at $12 per share, above the filing range of $8 to $10 per share, selling 13,439,600 shares and raising over $161 million in the IPO. The IPO gives the company an implied market capitalization of over $700 million.
The company's common stock will begin trading tomorrow on NASDAQ under the symbol JIVE. The company sold 10,072,463 shares and selling stockholders sold 3,367,137 shares in the offering. This was an increase of nearly 2 million shares than was indicated in their prior S-1/A filing. The lead underwriters were Morgan Stanley and Goldman Sachs. Venture capital investors in Jive Software include Sequoia Capital and Kleiner Perkins Caufield & Byers. Jive is an enterprise social networking company that enables companies to communicate and collaborate with its employees, customers and partners. Links: Jive Software press release: http://www.jivesoftware.com/news/releases/2011/12/jive-software-announces-pricing-of-initial-public-offering Wall Street Journal article: http://online.wsj.com/article/BT-CO-20111212-714832.html Forbes: http://www.forbes.com/sites/tomiogeron/2011/12/12/jive-software-prices-ipo-at-12-per-share/ Zynga's IPO is on track to price next week, according to reports. Some are predicting a huge first day pop for the IPO price. Zynga is offering 14% of the company in its IPO (see my prior post on 12/2/2011), which is a relatively small amount, and could result in a first day supply/demand imbalance and a price increase.
Venture Capital investors include Kleiner Perkins Caufield & Byers, Institutional Venture Partners, Foundry Group, Avalon Ventures and Union Square Ventures. Links: Bloomberg: http://www.bloomberg.com/news/2011-12-08/zynga-said-to-receive-enough-orders-to-cover-all-100-million-shares-in-ipo.html Seeking Alpha: http://seekingalpha.com/article/312763-zynga-ready-to-skyrocket-out-of-the-gate MarketWatch: http://www.marketwatch.com/story/zynga-jive-software-to-head-big-ipo-week-2011-12-08?link=MW_latest_news Zynga today filed its S-1/A with the SEC establishing the proposed pricing for its IPO. Zynga is planning to raise up to $1 billion ($1.15 billion if the over-allotment option is exercised) in its IPO, offering 100,000,000 shares of Class A Common Stock at between $8.50 and $10.00 per share. This could value the company at around $7 billion on an outstanding share basis or as much as $10 billion on a fully-diluted basis.
Venture Capital investors include Kleiner Perkins Caufield & Byers, Institutional Venture Partners, Foundry Group, Avalon Ventures and Union Square Ventures. Here's a link to Zynga's roadshow presentation on RetailRoadshow: http://www.retailroadshow.com/sys/launch.asp?qv=11284801363945007&k=43589288736 Here's a link to a Forbes article about Zynga's roadshow: http://www.forbes.com/sites/tomiogeron/2011/12/02/zynga-on-roadshow-seeking-up-to-1-billion-in-ipo/ Jive, the Facebook for enterprises, has set the terms of its IPO. According to its S-1/A filing with the SEC (link), it plans to offer 11.7 million shares (8.3 million from the company and 3.4 million from selling shareholders) at between $8.00 and $10.00 per share. Jive is backed by Sequoia Capital and Kleiner Perkins Caufield & Byers. Neither firm is selling in the IPO.
Dan Primack hits the bulls-eye with his article "Hold Your Horses of the Internet Apocalypse"11/26/2011 Dan Primack, a Senior Editor of Fortune, recently posted an article about how some people are crying out "the tech bubble has burst" with Groupon's stock price falling below its IPO price. It's a good article and reminds us that a few data points may not be enough to signal a collapse of the tech industry. Here's the link: http://finance.fortune.cnn.com/2011/11/25/hold-your-horses-of-the-internet-apocalypse/
Groupon (Nasdaq: GRPN) closed today at $16.96, below its IPO price of $20 per share. Groupon priced its IPO on Nov. 3 and began trading on Nov. 4. It hit a high of $31.14 in intraday trading on Nov. 4. In my opinion, this should not affect the IPO plans of seasoned companies with proven business models. Groupon is a young company with, in my view, a still unproven business model in a fiercely competitive market. The IPO window should still be open to ompanies with proven, profitable business models.
Here are some links to articles discussing Groupon: New York Times: http://dealbook.nytimes.com/2011/11/23/as-investors-flee-groupon-outlook-for-i-p-o-s-darkens/ Bloomberg: http://www.businessweek.com/news/2011-11-23/groupon-shares-plunge-below-ipo-price-3-weeks-after-offering.html Mercury News: http://www.mercurynews.com/financial-markets/ci_19401073 Eliot Spitzer, when he was Attorney General of New York, negotiated a universal settlement with Wall Street banks that, among other things, prohibited equity research analysts from participating in underwriting activities. The San Francisco Chronicle has an interview with Mr. Spitzer on the impacts of financial regulation. The story can be found here: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/19/BUUA1M0II9.DTL
Angie's List Inc. (Nasdaq: ANGI), the subscription consumer review website, saw its shares surge in its first day of trading yesterday. Angie's List priced its initial public offering at $13 per share, at the top of the indicated $11 - $13 price range. BofA Merrill Lynch was the lead underwriter on the IPO. The company sold 6.25 million shares and selling shareholders sold 2.54 million shares, for a total of nearly 8.8 million shares in the IPO. Angie's List shares closed at $16.26 in its first day of trading.
Venture capital investors include BV Ventures and Battery Ventures. Here's the link to the Company press release: http://investor.angieslist.com/releasedetail.cfm?ReleaseID=624660 Link to the Company's Final Prospectus filed with the SEC: http://www.sec.gov/Archives/edgar/data/1491778/000119312511314921/d222159d424b4.htm Link to Bloomberg article about the IPO: http://www.bloomberg.com/news/2011-11-16/angie-s-list-raises-114-million-pricing-ipo-at-top-of-range.html Yelp! Inc. has filed its S-1 registration statement with the SEC, looking to raise up to $100 million in its initial public offering. Goldman Sachs will be the lead bookrunning manager, Citigroup and Jefferies will be joint bookrunning managers, and Allen & Co. and Oppenheimer will be co-managers of the offering, according to the Company's press release. Venture capital investors include Bessemer Venture Partners, Elevation Partners, Benchmark Capital and Duff Ackerman & Goodrich, according to Dow Jones VentureSource.
The registration statement indicates that there will be two classes of stock, Class A common stock, which is to be sold in the IPO, and Class B common stock, which has super-voting rights that will be held by insiders. Link to the Company press release: http://www.prnewswire.com/news-releases/yelp-files-registration-statement-for-proposed-initial-public-offering-134058533.html Link to the S-1 registration statement: http://www.sec.gov/Archives/edgar/data/1345016/000119312511315562/d245328ds1.htm Link to Bloomberg story: http://www.bloomberg.com/news/2011-11-17/yelp-files-to-raise-100m-in-ipo.html Link to Forbes story: http://www.forbes.com/sites/tomiogeron/2011/11/17/yelp-files-for-100-million-ipo/ There's a good posting on DealBook discussing how savvy entrepreneurs preserve equity in their companies. Here's the link: http://dealbook.nytimes.com/2011/11/15/the-wisest-entrepreneurs-know-how-to-preserve-equity/
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