IPOs are Headline News for Technology and Life Sciences Companies
May 02, 2014
By Marc Fogarty, CPA, CFE
There's been a lot of first-quarter IPO activity, especially in the technology and life sciences sector, and the companies entering the market have a range of shapes and sizes. As you may have seen in my prior blogs, company valuations have been high; some based on historical performance and projected performance, some with income, but many with losses.
As of April 2, there were 170 filings for IPOs in 2014 (per www.nasdaq.com/markets/ipos/). This does not mean that there have been 170 IPOs, but rather that many companies have filed paperwork, with the intent to go public this year.
What does this flurry of activity indicate? Businesses are taking advantage of the opportunity to become public and raise a significant amount of capital. According to Thomson Reuters, companies worldwide raised $47.2 billion in new stock sales. 1
There has been negative press with high profile IPOs that were not as successful as originally hoped for, such as Five9 (software and business services), Castlight Health (health care software), and King Digital Entertainment (the makers of the game Candy Crush). However, there are standout success stories that are inspiring companies to move forward. For example, GrubHub (online restaurant ordering and delivery), IMS Health (technology solutions for health care providers) and Opower (energy efficiency solutions) all had recent IPOs that exceeded expectations and closed well above their initial offering price – anywhere from 15 to 31% higher.
If you are thinking of an IPO and you haven’t started the process, now might be a good time to explore the opportunity. It can take anywhere from 4 to 6 months to go through the filing process. My next blog will cover the general process of filing for an IPO and what you need to know before meeting with the team that will help you achieve your goal.