IPOs May Flounder In 2012
Wednesday, January 04, 2012

Lots of investors have gotten rich over the years by backing Internet IPOs; and lots have gotten poor, as well. Is it just luck? timing? clever selection? Not many pundits are brave enough to make a prediction for 2012, but Darren Yip of Dealogic goes as far as to point out that there were 38 such transactions in 2011, raising more than $9bn, the most in any year since 2000, when, indeed, many people did get rich.

What is sure is that there is a mighty queue of would-be Internet public companies, and what they are waiting for is the right moment. The ones in Europe will have a long wait, most people think. In the US, Yandex led the pack in 2011, raising $1.4bn in May; two other major deals were Nexon ($1.2bn) and Zynga ($1bn), both in December. But, says Dealogic, after day one rises in many cases, most newly-floated stocks have fallen, by an average of 18% in 2011. Not encouraging!

Bloomberg thinks that IPO floats will raise $11bn in 2012; but if Facebook takes the plunge, with a projected $10bn IPO, that number could be much higher.

A lot of Internet IPO activity is driven by private equity firms wanting to monetize their holdings, and the trend last year was for the PE firms to look to secondary private offerings rather than full-on public IPOs; they can't get the valuations they want in the public market-place, so they would rather spin their wheels and wait for things to get better.

It could be that better IPO opportunities will be available in forced privatizations in Europe during 2012, although not many of those will be Internet-related. Many governments are being forced to commit themselves to strenuous privatization timetables, and unlike the venture capitalists they won't be able to pick and choose their moment to go to market. Nor for that matter will they care so much about valuation; it's not their money in the first place!