Will Tech IPOs Come Back Soon?
from the theories... dept
Venture capitalist Fred Wilson has laid out his reasons for why he believes the IPO market is about to come back. It's a worthwhile read if you're interested in the startup ecosystem. While I tend to agree with Fred on many different things, on this one I'm not at all convinced. I do agree that there are a growing number of companies who in the past would have gone public about now, but are held back by the near total lack of willingness to risk running the IPO gauntlet. The one thing that we agree on is that investors are going to start looking to put money into new investments sometime soon (there's way too much money being flooded into the market, and it needs to go somewhere). I'm just not convinced it will go into the traditional IPO market. I think it would be good if the IPO market opened up somewhat, but a flood wouldn't be good. It would create another bubble scenario. My guess (at this point) is that the money will go into something unexpected -- perhaps even new financial instruments. However, I'm curious: where do people think all the money that's being dumped into the economy will flow? What's the next bubble going to be?
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meet the new bubble
Same as the last bubble, it will be real estate. Round and round she goes, where she stops nobody knows . . .
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Bubble - The Next Generation
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Hmm
Well, let's review dominant industries by decade:
20's - War
30's - Infrastructure
40's - War
50's - Foriegn Markets
60's - Space Exploration, Intelligence infrastrucure
70's - War
80's - Nuclear expansion, rearmament
90's - Internet, technology hardware
00's - War
So, it'll probably go something like
10's - Tech/foriegn markets
20's - War
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Re: Hmm
Personally, I wouldn't think the IPO market is going to rebound much, relatively speaking. Market conditions are just incredibly hostile to investors right now, thanks in large part to the Obama administration: continued bailout of failing incumbents at the expense of their competitors' market share; a disturbing trend away from contractual enforcement; threats to further empower unions at the expense of companies; threats to raise capital gains rates; threats to instill taxes on foreign market revenue, putting U.S. companies at a disadvantage; constant encroachment of federal regulations into more and more markets; etc. And this doesn't take into account that the IPO market was already terrible as a result of things like Sarbanes-Oxley even before consumer spending crashed, or the very real threat of significant inflation on the horizon.
Of course, the good thing about human nature is that there will always be plenty of individuals attempting to make a profit; I just don't think nearly as many will want to take beneficial risks when they have a better shot at success now by spending their capital on lobbying or something. Can there be a bubble if so little of this money is actually being devoted toward investment and growth? Or will the economy just stagnate? My guess is that inflation will take care of the circulation issue. Hopefully I'm wrong.
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SOX
Now, most companies look to get bought out by a larger company instead.
This is probably a large factor in the recession we're facing, but nobody is really talking about it. But at least the 100 grandmas are safe from having their money taken...by corporations, I meant, not investment schemes. The reality is that the 100 grandmas will always have their money taken by somebody, which means SOX probably costs the US more than it saves every year.
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Re: SOX
Im not sure you actually established any causal relationship here?
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Re: SOX
Well, there may have been other issues, but SOX has definitely been a major issue in slowing down IPOs. It adds a pretty massive expense. However, as Fred notes in his post, it's now been around long enough that the added expense of SOX is a known factor, and you can more accurately estimate how much it will cost to be SOX compliant, so it becomes less of an issue (though, still not no issue... just a higher barrier).
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where the money will go
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It's Capital Flight, Not Flow
Capital is going to be leaving the US, not pouring into the IPO market here. Where there's no rule of low, there's ultimately no confidence. What I'm not clear on is where all that money goes (can it really all end up in corrupt hands?). But even though we're only 100 days into the administration, I already only a fool or hopeless romantic would invest in the US economy.
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