You’d need a crystal ball to know how healthy the IPO market will be in 2013. Still, industry watchers – looking at the 152 active IPOs in the pipeline, versus the 226 IPOs in the pipeline at this time last year — feel safe in making a few, cautious forecasts.
The least surprising of these is that cloud computing and software as a service will continue to be of major interest to hungry public market investors. “With the strong performance of last year’s IPOs like Workday, and their spectacular top-line growth, we’ve been pretty active in that space and we expect to remain so as the year progresses,” says Carter Mack, president of the investment bank JMP Group (whose firm was among Workday’s many underwriters).
“If the market stays strong — which is very debatable with the debt ceiling and so forth — I’d expect once again tech to lead the IPOs that debut for the third year in a row,” adds Scott Sweet, a managing director at IPOboutique.com.
Beyond tech, oil and gas companies are also coming on strong, notes Sweet, who points to the natural gas compression service company USA Compression Partners, CVR Refining (a master limited partnership owned by CVR Energy), and SunCoke Energy Partners (a subsidiary of Lisle, Ill.-based coal producer SunCoke Energy) among others that have filed their S-1s or amended S-1s this week.
As for biotech companies, fuggedabout it, suggests Sweet; 2013 won’t treat them muor kindly than in previous years.
“Biotechs just don’t make for good IPOs,” says Sweet. “Almost like clockwork, they file high, with a range of around $13 to $15, then they’re eventually priced at $7. They burn so much cash that they have no choice.”
Also facing a tough road: second-tier consumer Web companies. “There are still interesting companies like Twitter that would generate a lot of interest,” notes Mack. “But some of the lesser know companies in social media will have to demonstrate very strong metrics and top line growth and I don’t think there will be as much exuberance” around their offerings in the wake of some disappointing offerings in late 2011 and 2012, including those of perceived market leaders Facebook, Zynga, and Groupon.
Of course, it’s become harder than ever to make solid predictions about what’s around the corner owing to the JOBS Act, which more than 100 companies have already taken advantage of to confidentially file the first drafts of their offering documents, according to the SEC.
“The problem with looking at the pipeline is that there are many fewer public filings, as most startups that qualify as ‘emerging growth companies’ under the JOBS Act now file confidentially and hold back on a public filing until 21 days before they start their road show,” says Mack.
Indeed, he suggests that anyone really trying to get a pulse on the IPO market would be wise to think shorter term. “It definitely gives you a better idea of what companies will be hitting the market in the next couple of months.”
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