LIFT OFF: Can Venture Thaw the IPO Ice Age?
swanson, bret
Can Venture Thaw the IPO Ice Age? LIFT OFF In March, three key optical net
working firms, two innovative semicon
ductor companies, and numerous soft
and biotech ventures...
...WalterWriston wrote that politicians and bureaucrats are in the twilight of their sovereignty...
...The rules also prohibit companies on file from raising private capital while they wait to go public...
...Fed Chairman Alan Greenspan asserts control and deflates the non-inflationary stock and IPO "bubble...
...Entrepreneurs and their innovations can still win...
...Four hundred forty-nine IPOs raised $64 billion in 1999, and 605 IPOs raised $165 billion in 2000...
...For the year, 79 IPOs have been withdrawn...
...Companies must periodically update those filings...
...With some 970 companies exhibiting at the optical fiber conference and tens of thousands more in wireless, biotech, and other industries, such understanding by the owners is crucial...
...Venture capital vaulted from $60 billion in 1999 to $104 billion in 2000, funding 4,000 and 5,450 companies respectively...
...Only the March spin-off of Lucent's microelectronics group, Agere Systems (AGRa), could spare the quarter total humiliation...
...Federal Reserve deflation, the highest tax burden since World War II, and de facto nationalization of broadband access have slowed the economy and crashed markets.They have also shut the window on companies looking for public capital infusions...
...At $3.6 billion, it was the fourth largest IPO ever in dollar terms, but the offering was far from a success...
...THE AMERICAN SPECTATOR May 2001 67...
...Less politely, they are on the verge of uselessness.The power shift away from Washington and Wall Street scares the establishment...
...The IPO deep freeze is hardest on companies at the margin...
...ware their Commission S-1 filings...
...If public markets continue to dawdle, venture capitalists could beat investment bankers for the whole year...
...That's because VCs are closer to the entrepreneurs and technologies...
...From Optical Micro Machines, a maker of silicon micro-mirrors used in optical switching, to WaveSplitter, a young leader in wavelength division multiplexing, and from International Microcircuits, an upstart competitor to Texas Instruments, to Conexant's network chip spin-off, important companies are being turned away from the public markets...
...Venture capitalists, in fact, would probably love to get one more shot at the leading firms before they exit the private realm...
...The public markets are closed, but you wouldn't know it from the astounding number of venturefunded innovations in Anaheim...
...Though the private-public gap widened for the full year, venture money overtook IPO money in the fourth quarter of 2000...
...Few companies enjoy issuing new figures implying much lower valuations, so they go back "underground...
...They overreact...
...With investment banks and brokerages obsessed with Washington and Wall Street accounting, those who deeply understand technologies and the people behind them, namely the VCs, angel investors, and open IPO affinity groupswhich function more like late-stage venture capitalists than like traditional public investors, will discount market gyrations and earn corresponding returns...
...Since 1980, an average of 74 first-quarter IPOs have raised an average of $6.1 billion, unadjusted for inflation...
...For companies like Chorum with exceptional products and a healthy cash position, however, postponing an IPO isn't the end of the line...
...That's the worst showing since 1989 with just 12 first quarter offerings...
...Congress insists that we need wartime tax levels and micromanaged telecom networks...
...And as tele com spending slows with the economy, it's likely that last quarter's revenues, which must be reported, are less than stellar...
...Forgone proceeds from abandoned offerings total well over $10 billion this year...
...The Forbes venture capital roundtable estimates $40 billion in venture capital this year...
...LIFT OFF In March, three key optical net working firms, two innovative semicon ductor companies, and numerous soft and biotech ventures withdrew Securities and Exchange BY BRET SWANSON Government policy makers can add first-quarter initial public offering totals to their list of embarrassments...
...The power shift away from Washington and Wall Street scares the establishment...
...A new market architecture is emerging, hastened by the current downturn...
...Include December withdrawals by companies looking to go public in early 2001 and that number swells to 110...
...Agere originally hoped to raise $6.5 billion for its operations, which include semiconductors, optical components, and tunable lasers...
...Even last month's feature company, Chorum Technologies, had to withdraw At the Optical Fiber Communications conference in Anaheim, Chorum's Mike Decelle told me that SEC rules discourage companies from leaving IPO filings in play until the market bounces back...
...But Wriston remains largely correct...
...Excluding Agere (pronounced "a gear"), 16 first-quarter IPOs raised just $4.5 billion...
...Private equity and open IPOs can overwhelm Greenspan's punctured public bubble...
...Power has shifted from Wall Street to Silicon Valley...
...Many have gone through several rounds of venture funding and need public money to continue, or to pursue new strategies...
...And we know what happened to the economy in 1990...
...A new market architecture is emerging, hastened by the current downturn...
Vol. 34 • May 2001 • No. 4
