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IPO Market Tanks: Does this mean going public is obsolete? July 2, 2008

Posted by arikjohnson in Uncategorized.

So this can’t be good news… but maybe it simply means going public is obsolete. There was a good video on CNBC on the subject and VentureWire has a summary below that.

The IPO drought has become a crisis, according to the National Venture Capital Association, which called the absence of venture-backed public offerings in the second quarter “the canary in the coal mine.”

The pronouncement came as VentureSource, a research unit of VentureWire publisher Dow Jones & Co., released data showing that the merger and acquisition market, the other major source of exits for VCs, also suffered in the first half of 2008.

This year so far has been especially painful for venture investors, who after a strong 2007, expected to take many more companies public in the first half of this year. Instead only six venture-backed companies went public in the first quarter and none in the second, according to VentureSource. In the first half of 2007, 37 venture-backed companies went public.

The last venture-backed company to go public was CardioNet Inc. on March 19. This is the longest IPO dry spell since a five-month lull from Dec. 18, 2002 to May 12, 2003. Meanwhile, 21 companies have withdrawn IPO filings so far this year, according to VentureWire records.

“We need to put regulators, legislators, presidential candidates, and the private sector on notice that this situation represents a serious problem that will have long reaching economic implications if not addressed,” Mark Heesen, president of the NVCA, said in a statement. The group says start-ups are a job-creation engine and issued a report last year showing that public companies initially backed by VCs account for 10.3 million jobs and 18% of U.S. GDP.

On the M&A front, VentureSource data show the slowest first-half market since at least 2000 with only 142 deals. Last year there were 203 M&As in the first half. Deal value fell to $16.1 billion from $19.2 billion in the year-ago period. Especially worrisome is the torpid deal rate in the second quarter, which saw only 56 transactions worth $4.7 billion.



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