IPOs are Waking Up

The Wall Street Journal reported yesterday that the IPO market is waking up. Five IPOs were completed just this week. But it’s been pretty quiet for the year before that. Three or four a month is better than none, but not yet a trend. In the height 400 IPOs a year were zooming through, that’s like 35 a month for my bad math mind. Even in the tough months there were 10-15 reverse mergers and the hope is to get back to the 15-20 a month that we were seeing consistently in other times. And the Journal made clear there’s still a lot of weakness in the IPO market, with a number of deals on hold or pricing lower. But some are doing quite well indeed.

I think there are many good reasons for a company to pursue an IPO if it can. We do legal work in connection with IPOs and enjoy it. IPOs and IPO alternatives have existed side by side for decades. There is no right or wrong way to go public. Ironically, historically when IPOs are busy we are also busy with reverse mergers, such as during the Internet boom of the late 1990s. Then some companies wanted to get public even faster than in an IPO, or wanted less dilution than typically takes place in a large IPO. The key is for each company to examine its short and long term goals and reasons for being public. Then it should examine how fast it needs to be public, how it can finance itself through the process, how much it can spend for the process and what benefits it sees from being public. If a strong successful underwriter with a good “hit ratio” of completing deals they set out to do is ready to help with an IPO and financing during the process (if necessary), it is absolutely something a company should seriously consider. Just remember that while it is an option, it is not the only option! Look at all the alternatives and weigh the pros and cons to see what works for you. Go market!

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