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Goldman Sachs Group Inc.'s (NYSE: GS) initial public offerings (IPO) guru Tom Tuft has joined Bruce Wasserstein's Lazard Ltd. (NYSE: LAZ) as chairman of Global Capital Markets Advisory and vice-chairman of its U.S. investment banking, in what could be a sign that the market for IPOs is thawing.
Tuft, a 33-year Goldman vet who co-founded its equity capital markets business in 1985 and became its chairman in 2004, was involved in several high-profile IPOs, including those of The Estee Lauder Companies Inc. (NYSE: EL) and RJR Nabisco Inc. He also advised Lazard on its own IPO in 2005.
A slowdown in mergers and acquisitions has prompted Lazard to expand its equity capital markets and restructuring operations, working on nine of the top 10 bankruptcies this year, Bloomberg News reported. Capital raised by IPOs in the first half of this year was $11.4 billion, down 85% from the same period last year according to data compiled by Bloomberg.
"There is demand for companies to come public," David Menlow, president of IPOFinancial.com told Bloomberg. "The fact that we haven't seen that many is not an indication that companies are not out there ready to come public."
There have been 21 IPOs this year, compared to hundreds from a few years ago. Still, companies continue to go public in this uncertain economic environment, including big-name companies likeand
The pace of IPOs will likely rise to about three a week on average, as long as the economy remains stable and the market doesn't deteriorate, University of Florida finance professor Jay Ritter told The Associated Press. Ritter attributed his estimate to a similar period in 2003 to today when the economy was making its recovery from the dot-com bubble burst of 2001.
Even in this economy, there have been several IPO success stories. Rosetta Stone Inc.'s (NYSE: RST) April IPO of $18 a share netted investors a gain of 39%, closing at $25.12 on its first day of trading. The average return on investment of IPOs in 2009 has been about 28%, advisory firm IPO Boutique Senior Managing Partner Scott Sweet told The AP.
"," Sweet said, "and people are saying, you know, these are working."
It's not all smooth sailing for the companies that went public this year – after all, the current recession is worse than any one before it since the Great Depression. Rosetta Stone is one example of this: Since its strong IPO, shares are down more than 18%, and the company recently canceled its secondary public offering after it lowered its guidance for the current quarter.
The "Silicon Valley Six"
An informal poll of venture capitalists and others conducted by Reuters yielded six successful companies with revenue of $100 million or more in Silicon Valley that are ripe for acquisition or an IPO, excluding social networking sensations Facebook Inc. and Twitter Inc. The news service dubbed the companies the "Silicon Valley Six," which were chosen out of 34 citied in sectors ranging from alternative energy to video games.
The top four companies found were social network LinkedIn Corp., solar panel maker Solyndra Inc., smart grid company Silver Spring Networks and Zynga Inc., which develops games that run on social networks like Facebook or New Corp.'s (NYSE: NWS) MySpace.
"They are exciting because they…demonstrate what is possible with venture capital," Sharon Wienbar, managing director of Scale Venture Partners told Reuters. "These are companies that have proven a new, attractive business model that works big in spaces."
Venture capitalists' rule of thumb for declaring a company ripe for an IPO is that a company must have $100 million in sales and have a capitalization of about $1 billion in order to have enough money to meet the reporting structures of the Sarbanes-Oxley act.
"The market is in the early stages of being back," LiveOps Chief Executive Officer Maynard Webb said. "The market is ripe and open today for great companies."
While not mentioned in Reuters' "Silicon Valley Six," one private company that's making waves in Silicon Valley is PopCap Games Inc., which publishes and develops easy-to-play, accessible "casual" video games.
The company recently appointed Robert Chamberlain, a finance veteran that arranged IPOs for several tech companies, as its new chief financial officer.
"[Chamberlain will] oversee a sizable team of finance and accounting professionals while also providing critical expertise to our overall expansion plans," said PopCap CEO Dave Roberts, without alluding to a public offering.
Still, PopCap has been self-funded since its inception in 2000 and has no immediate plans for a public offering, spokesman Garth Chouteau told Money Morning in an e-mail.
"Bob's long track record and extensive experience will be valuable to us if and when we seek some form of 'liquidation,'" he said.
News and Related Story Links:
Lazard Hires Goldman's Tuft to Handle IPO Advisory
- The Associated Press:
Rosetta Stone Inc. Announces Updated Guidance for the Third Quarter and Full-Year 2009 and Discontinues Follow-On Offering
Silicon Valley's Six Hottest Startups