As Facebook angles toward an IPO this month and other hot offerings also leap to public company status, one thing is clear. There is excitement again among U.S. IPO investors, and many venture capitalists, bankers and entrepreneurs think the road from here leads up.
With this backdrop, Venture Capital Journal recently took a look at the venture-backed IPOs of the past 4 quarters to learn what has worked and what will continue to work, at least for the time being. VCJ zeroed in on the 21 U.S.-based companies with public offerings in the first quarter and the 29 with offerings in the previous three quarters.
What Senior Editor Mark Boslet found is a remarkably buoyant market first quarter 2012 market with the vast majority of offerings—86%, to be exact—holding solid stock gains above their IPO prices (at least as of the time that VCJ went to press in mid-April).
VCJ also found discriminating investors, a good sign for market longevity. Their selectivity has forced even promising companies, such as solar thermal power plant provider BrightSource Energy, to withdraw offerings in the face of tepid demand.
“It’s now as receptive an IPO market as we’ve had for the past several years,” Richard Kline, a partner at the law firm Goodwin Procter tells VCJ. And “it hasn’t been a stampede.”
Here are some other observations about this year’s market that may be a useful guide for the quarters to come:
Strong Stock Gains. Of the first quarter IPOs, 95% ended their first day of trading with a gain. Plus, 86% remained above their IPO prices as of mid-April. This makes it easy to see why Q1 has been lauded as the best in many years.
The Market’s Strength is Building. Signs of strength have not diminished. Slightly more than half of Q1 IPOs—or 52%—finished their first day with stock gains of 20% or more. As of mid-April, 67% had achieved these same gains of 20% or greater, a nice increase.
High Growth is Rewarded. Companies with revenue growth of 40% or more have reaped spectacular rewards. Their market caps can be 7x sales or higher. In other words, quite generous. (The VCJ analysis used trailing revenue growth, not future projections, in its calculations.)
For more about VCJ’s analysis of IPOs, subscribers can go here to read the story, which includes tables on the best and worst-performing IPOs.
If you’re not a VCJ subscriber, contact VCJ Sales Manager Greg Winterton at [email protected].