Wednesday, June 29, 2011

More on IPOs

I've written before about IPOs and venture capital. So that the majority of you who do not have tech companies do not feel left out, I am sharing with you an excerpt from an article I read on CFO.com. It talks about the continued rise of the IPO market. (Hah! The majority of the investment bankers agree with me.) It also discusses how the majority of the IPOs and the funds raised are for more mature, stable companies (i.e., not technology wunderkinds). Many of these are backed by private equity firms looking to cash out. Notice the theme here? Private equity firms like to cash out and recoup their investments just liike venture capitalists do. When the stock market is strong, which leads to a stronger IPO market, private equity firms have the additional option of using a standard IPO as a means of cashing out. The more options for selling their stakes they have, the sooner they can realize their investment, the sooner they can raise a larger fund and invest even more money into growing companies.

Here is the excerpt from CFO.com's IPO Market to Stay Strong, Say Bankers:

-----------------------While new-media companies such as LinkedIn and Pandora have received most of the hype, many of the larger IPOs have in fact been those of well-established firms that were backed by private-equity investors. One company in that category, hospital chain HCA Holdings, raised $3.79 billion; another, energy-pipeline firm Kinder Morgan, raised $2.9 billion. By contrast, LinkedIn raised $352 million in its debut. Bankers were most likely to cite the continued presence of such PE-backed firms as a reason they expect deal size to go up. Several, including Toys "R" Us and Dunkin Brands, have already filed to go public.

"These are not necessarily new start-up companies," says Wendy Hambleton, a partner in the capital markets practice of BDO USA. "Investors are looking for more stability and profitability."----------------------------------------------

 



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