| |||||||||||
| |||||||||||
Making their public debuts last week alone were: Invesco Mortgage Capital Inc. (NYSE:IVR), an Atlanta-based real estate investment trust, or REIT; Chemspec International Ltd. (NYSE:CPC), a Shanghai chemicals maker; and Duoyuan Global Water Inc. (NYSE:DGW), a Beijing supplier of water treatment equipment. Even venture-backed startups have returned to the IPO market this year. The VC-backed IPOs this year are: Medidata Solutions Inc. (NASDAQ:MDSO), which had its IPO last week; restaurant reservation service OpenTable Inc. (NASDAQ:OPEN); and network management software company SolarWinds Inc. (NYSE:SWI), which began trading in May. Additionally, venture-backed software company LogMeIn Inc. is expected to go public later this week. At first glance, it might seem counterintuitive to conclude the credit crisis is driving the explosion in initial public offerings, but take a closer look at circumstances. For starters, the entire economy is in the process of deleveraging, which means different things to different aspects of the economy. For banks, the deleveraging of the system means a back-to-basics approach to making money. As a Wall Street Journal story about pending bank earnings for the second quarter succinctly put it: "instead of relying on risk and leverage to drive profits, companies such as J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. are getting back to basics, with a strong performance from trading and underwriting." In other words, to make a buck, banks probably are willing to take on any IPO candidate that comes through the door. Additionally, thanks to the credit crisis, companies are likely finding the cost of capital is cheaper by going public -- or a secondary offerings -- than to seek debt. These two factors are likely contributing to June's IPO frenzy. - Matthew Wurtzel See story about banks from The Wall Street Journal
CategoriesComments
From: Matthew Wurtzel
 ,
Don, Thanks for the response. However, before calling people names, please pay close attention to the non-VC backed IPOs: Invesco Mortgage Capital Inc. (NYSE:IVR), an Atlanta-based real estate investment trust, or REIT; Chemspec International Ltd. (NYSE:CPC), a Shanghai chemicals maker; and Duoyuan Global Water Inc. (NYSE:DGW), a Beijing supplier of water treatment equipment. These businesses likely have an option to issue debt. Perhaps I should have been a little more specific in that regard. Matthew Wurtzel
Posted on:
June 30, 2009 3:01 PM
From: just.a.guy,
Of course there are plenty of reasons companies go public other than a necessity to raise capital. These include: 1) Liquidity for early equity investors [which is often restricted as a use of funds for debt issuance, ESPECIALLY these days!] 2) Liquidity for early employees and management / founders (also investors, but of blood sweat and tears) 3) Acquisition currency (public stock) for Mergers and Acquisitions 4) Public Relations Value to help business development activities, recruiting employees for expansion, etc. If the credit crisis is driving IPOs, by the way, then why until recently have there been virtually none? Your entire premise is terribly flawed here.
Posted on:
June 30, 2009 11:16 PM
Private capital video
Categories
Blog roll
Archives
| |||||||||||
Last week four companies went public, and at least one more is looking to brave the markets during the holiday week. So what is powering the sudden initial public offering frenzy? One possibility is that the credit crisis is the driving force. 
|
|
|
|
|
Wow - this writer is really not very smart:
"Additionally, thanks to the credit crisis, companies are likely finding the cost of capital is cheaper by going public -- or a secondary offerings -- than to seek debt."
Start-ups don't issue debt - i.e. bonds. (And even in the go-go years, no bank would lend a start-up the tens or hundreds of millions they would raise in an IPO.)
The only way for them to finance growth is through selling equity.