A Reuters story uses the Go Daddy Group’s aborted IPO as an example of the struggles technology companies are having in going public.
As noted on this blog, Go Daddy’s planned $200-million IPO was withdrawn on Tuesday. The company blamed market conditions for its decision not to move ahead, though others factors seemed to be involved, too.
Reuters notes that ten technology IPOs, worth about $900 million collectively, have been withdrawn in 2006. Of the companies who retreated, only Activant Solutions Holdings Inc., acquired by a private-equity firm, did not cite market conditions as its reason for failing to forge ahead.
What’s more, of 17 technology IPOs that reached market this year, only seven ended their first day above their offer price. The most disastrous of IPOs this year involved VoIP service provider Vonage Holdings Corp., who shares fell 13 percent on their first day and ended trading today at $6.50 per share, approximately 62 percent below its $17-per-share offer price. To make matters worse, Vonage shows no signs of staging a recovery.
The Reuters reporter, Yung Kim, summarizes the technology sector’s public-market malaise in this paragraph:
The technology sector has struggled to recover from the dot-com bust. In 1999 alone, 258 tech companies registered for IPOs. Since 2001, a total of 140 companies have registered.
I realize that the public markets in 1999 were suffering from an infatuation with technology stocks that crossed over into the fevered realm of delusional mania, but has the market overcompensated by practically shutting off the IPO tap completely in recent years? Are technology startups as mediocre and undeserved of representation on the public markets as some observers would have us believe?
Make no mistake, that’s what some observers believe. Said Ben Holmes, publisher of Morningnotes.com, an independent research firm based in Boulder, Colorado:
The deals getting done are barely getting done and there are not a whole lot of things on the horizon in terms of quality to lift us up out of this market.
He’s not even damning private technology companies with faint praise. He’s saying there’s not much quality on the horizon.
Others think we’re going through a period of slow, painful market adjustment, shaking off a monstrous hangover from the dot-com bust. These commentators believe technology IPOs will again find favor with investors; they believe that new day will dawn soon enough.
But I’m not so sure. A maturing, consolidating technology market and inhibitive regulatory requirements might mean that the trickle of IPOs we’ve seen in recent years will be the norm rather than the exception.