Friday, June 22, 2012

Recent Pause in IPO Pricings

The graph above shows the number of Initial Public Offerings (IPOs) that actually priced since the beginning of 2008.  The data come from Yahoo Financial.  The blue curve is the data, and the black lines show a straight line from the beginning of each year to the end of it.

IPOs are important because they are a proxy for the process of new innovations reaching scale in the market (whether in technology, new kinds of business process, or otherwise).  Thus they represent one measure of the innovation process that drives economic growth in the long term (and all the benefits and disadvantages that flow from that).

You can see that there was a near cessation of IPOs during the financial crisis - the market completely shut down in late 2008 and only restarted slowly in mid 2009.  Then IPOs resumed a fairly normal pace in 2010 and 2011, and so far 2012 is roughly on a similar track.  However, there has been a little plateau since the Facebook IPO in mid May.

The data are somewhat seasonal - there are typically slowdowns around Christmas and in August and September, presumably due to key executives, investors, and investment bankers being on vacation and thus slowing down the deal flow.  However, a slowdown in Q2 is not normal.

Whether this represents the start of another big slowdown, or a temporary glitch driven by Facebook, remains to be seen.  Probably much depends on Europe.  If Europe is soon going to generate another Lehmann-type event, then we are in for an extended drought in IPOs of a number of months.  On the other hand, if the authorities there are able to thread the needle and find a way to keep things lurching forward, then perhaps this will soon look like a glitch.  It's very hard to predict which way that will break since it depends on the actions of a small number of officials, and those will only become clear at the eleventh hour.

At any rate, Renaissance Capital says that there are five IPOs due to price next week - we'll see how that goes.

(Also, in a spirit of full disclosure, this).


kjmclark said...

Wow! Congratulations, Stuart! OK, so it's probably a little early. Maybe someday when you're retired, you'll be able to write a book of your war stories.

Stuart Staniford said...

Kjm - yeah, definitely too early - right now I'm still dodging the bullets!