Blog of Intellectual Capital

Here is an excellent article from WSJ venture Blog.

“Should venture capitalists brace for a rebound in the IPO markets?

In a six-week period between May 20 and July 1, four venture capital-backed companies managed to price their initial public offerings, quite a feat considering none had done so in the previous nine months. All four priced at or above the high end of expectations and now trade higher than their pricings.

Sensing the urgency to catch the market while it’s hot (relatively speaking), some venture capital firms have scrambled to get some of their best candidates in shape to file for an IPO, several investment bankers say.

“This environment has led people to start up [the IPO process] again,” said Jeff Becker, managing director with investment bank JMP Securities. “The markets have been strong, and recent IPOs have done well.”

But market observers say start-ups that are ready to go public have already done so, and that the deal pipeline will take months to rebuild.

“For anybody who isn’t already on file… you’re talking four months at the shortest, but likely six months or more” before an IPO could be priced, said Becker, who expects to see more venture-backed IPO filings this year but few pricings before Thanksgiving.

Bryan Pearce, Americas director of the venture capital advisory group at Ernst & Young, said his firm began seeing an uptick in IPO interest from its venture- and PE-backed clients around April.

“I haven’t seen signs yet that we’re going to see the floodgates open, but I think we’re starting to take logs out of the dam and the water’s starting to flow over,” Pearce said.

Pearce predicted that “2010 will be the strong year.” He said technology companies with $50 million or more in revenue should be well-positioned if they have “stability and sustainability of their customer base,” experienced management and dry powder in case the IPO window doesn’t open as expected.

The broader IPO market is far from fully recovered. As of July 31, 16 U.S. offerings totaling about $3 billion had priced this year, down from 46 IPOs totaling $30.2 billion a year earlier, according to data provider Dealogic.

The current IPO market is the worst since early 2003, despite the “incremental increase” in the number of filings over the last couple months, said Richard J. Peterson, director at Standard & Poor’s Markets, Credit & Risk Strategies group.

However, private equity-backed companies appeared to be a bright spot on an otherwise bleak picture. According to Dealogic, seven IPOs by private equity-backed companies (including venture capital) were priced as of July 31 with a total value of $1 billion. While the number is down from $2.7 billion of such offerings in the same 2008 period, it accounted for a bigger percentage of all IPOs that were priced – 33% versus 8%.”

To read the full article, click here.