August was a bucket of cold water on what was supposed to be the best year for initial public offerings in the United States since 2007. And the tech/social media crowd played a strong role, even if the consumer goods sector was getting most of the credit. With the downgrade of U.S. sovereign debt earlier this month, market volatility effectively brought the IPO market to a screeching halt. Well, that’s the easy way to look at it.
According to Renaissance Captial, 10 companies filed to go public last week, and that’s just here in the United States. China could have its strongest IPO year in a long time, and there appears to be pent up demand for this type of liquidity event in Dubai. In the tech/social media psace, Zynga, Groupon and Jive Software have filed to go public, along with several others (including Brightcove and Bazaarvoice).
Of course, talk about a Facebook IPO filing persists.
So for a market that was supposed to be, at its best, on its knees, there seems to be a lot going on in the U.S. IPO world. This is particularly true of tech and social media companies.
As a medic looks at a casualty’s vital signs, let’s take a peek at those of the tech/social media IPO market.
1. Deep in the IPO chain: there is demand for some big names in the pre-IPO market. The action in venues such as SecondMarket and SharesPost continues to be robust. In the case of LinkedIn, for example, valuation soared relative to pre-IPO trading on opening day. As long as there’s demand in the pre-IPO space, there will be pent-up demand for exits, and that includes IPOs.
2. Won’t back down: Groupon continues to defend aggressively its decision to go public, despite hefty founder dividends and some accounting foibles (have you forgotten about ACSOI already?). Zynga appears to be staying the course, though word of a delay came out a few minutes ago.
3. Unbridled ambition: although there has been some talk of delays in the tech/social media IPO space, there are also plenty of big targets. Business social media platform Jive Software, for example, is looking for a valuation roughly commensurate with the size of its market.
4. Facebook is still out there: with an astronomical user base, estimated earnings of around $2 billion this year and an implied valuation, recently, of $87.5 billion in SharesPost trading (not to mention $65 billion in a recent nine-figure IPG divestiture), Facebook is clearly the IPO we’re waiting for. The company has yet to file, but rumor has it the S-1 will come in the fourth quarter of this year.
Target IPO valuation: (at least) $100 billion!
5. Don’t forget about Twitter: the microblogging platform has around 200 million users and commensurate hype. In its last venture capital round, the company reached an implied valuation of around $8 billion. Twitter isn’t even hinting at an IPO right now, but they’ve been introducing new features that will help it consolidate its market (at the expense of third-party app developers). It’s the behavior of a company that’s planning to go the distance.