The Real Reason So Many Web Companies Are Filing for IPOs

It's all about the money ... but the payday is going to someone you're forgetting!

There are more than 200 companies in the IPO pipeline, many entering at a time when the IPO market was ugly (namely Q3 2011). A lot of money has been spent preparing to go public, even in a market that doesn’t favor it. Zynga is set to start its IPO roadshow this week and go public (rumored) on December 15, 2011. Groupon thought it beat the odds in an ugly market before getting skewered just as soon as short-selling was permitted in its stock.

So, what’s going on?

Many companies are setting the stage to go public, even if they don’t plan to do so for a while. The thinking is that they’ll pull the trigger as soon as market conditions are favorable. And, the matter is reinforced by the intense demand to go public, including the social media/web 2.0 space. Companies are filing so they can be ready when the IPO window
reopens, allowing them to take advantage of an IPO quickly.

Well, there’s one more factor at play, and it traces back to all the investment companies have made in their IPO filings. There are a lot of investment banks underwriting these aspiring public companies, and they don’t get a big payday until an IPO happens. We’re coming to the end of Q4, and there’s still some time to justify better bonuses in what’s expected to be a meager year for incentive compensation on Wall Street.

Expect something in the IPO market to pop.