You've been waiting a long time to go public.
From day one you have steadily built your company with the goal of eventually trading it on a stock exchange. Over the years, you have had to overcome your share of challenges. But your company has emerged stronger and more prepared for an IPO. You've done your research and you are sure your company meets all the financial and distribution requirements. Now it's time to start the registration process and begin selling shares to the public, right?
Not necessarily. Qualifying to be a publicly listed company is only half the battle. After your registration has been approved, your IPO will be forced to either sink or swim in the marketplace. Even though you will conduct a road show leading up to the IPO, the biggest factor in the success or failure of your IPO may be the economy itself.
The recent economic downturn has significantly impacted the market for IPOs. There may be signs that the IPO market is on the rebound. But before you pull the trigger on your IPO, it's worth taking a look at what's been happening in the IPO market over the past few years and what is changing during the first part of 2010.
The 1990s were boom years for IPOs. During the Internet bubble, there were as many as 80 to 100 IPOs in any given month. When the bubble burst, so did the IPO market. The relatively strong market from 2003 to 2007 saw increases in IPOs, but not nearly to the level that they were during the 90s. And when the floor fell out of the economy in 2008–2009, it had a devastating effect on the IPO market place. At one point, IPOs reached their lowest all-time level with just four IPOs coming to market between September 2008 and January 2009.
As the economy began to recover throughout 2009, the IPO market began to make a slow comeback although the recovery of the IPO market is still less than it was in 2003. Through the first quarter of 2010 there has been a monthly average of eight IPOs coming to market. To be considered truly healthy, the market should grow to a level that supports 20 IPOs per month. However, indications seem to point to the idea that the IPO market is poised for steady growth. Companies that are considering a public offering would be well-advised to watch the market closely and proceed with caution.