This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Tech IPOs Set for Strong 2012

NEW YORK ( TheStreet) -- While 2011 saw a frenzy of IPOs from hot Internet companies like Groupon (GRPN - Get Report), Zynga (ZNGA - Get Report) and LinkedIn (LNKD - Get Report), expect this year to see relatively fewer large-scale offerings.

There were 44 U.S. tech IPOs last year, nearly double the number of offerings of any other sector. Of these, around half were Internet companies, including four of the five largest Internet IPOs in U.S. history.
Other than Facebook, the majority of tech IPOs in 2012 are likely to be relatively small.

But while investment bankers expect a similar number of IPOs in 2012 compared to last year, with the exception of Facebook, they anticipate smaller sized offerings.

"We expect to see generally smaller deal sizes, similar to 2010," said Frank Maturo, head of cash equity capital markets at Bank of America Merrill Lynch. "We've seen a number of big names in tech come to market in 2011, so average deal sizes for this year will likely be $200 million or less."

The average deal size of a tech IPO during the fourth quarter of 2011 was around $292.5 million, according to a report from PriceWaterhouseCoopers, almost triple the figure from a year earlier.

And while Facebook is expected to be a "complete blowout," according to one equity capital markets banker, who didn't want to be named citing firm policy, it's unclear if it will open up the flood gates for offerings from other companies.

"I think there's enough momentum, with or without Facebook," said the banker. "They'll clearly have a big influence, but won't open or close the market per se."

According to the latest reports, Facebook is eyeing a May IPO that could value the social networking giant at as much as $100 billion.

The tech market is likely to be supported in part by strong investor interest in Internet IPOs, despite a tepid performance from the sector last year. U.S. Internet IPOs saw a 17% decline in average return in 2011, according to IPO investment adviser Renaissance Capital.

Shares of Groupon, which opened up 40% in its Nasdaq debut in November, have since fallen 20%.

Pandora (P - Get Report) shares have also declined 20% since the online radio company's June IPO, while Zynga is down 5%.

"There's still an interest in consumer Internet companies and it's top of mind for investors and everyone in the world, frankly," said Todd Speece, head of technology and clean tech equity capital markets at Raymond James.

Investors, however, are becoming more diligent about evaluating buzzy tech companies than they may have in the past.

"We've seen an increasing interest among the portfolio managers in our account base to meet with late-stage private companies," said Terry Schallich, head of equity capital markets for Pacific Crest Securities. "Part of their motivation is to have a longer period of time to get to know the companies before they become public.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GRPN $3.29 0.92%
LNKD $121.78 -1.10%
P $9.65 3.30%
ZNGA $2.54 -0.39%
AAPL $92.69 -0.59%


Chart of I:DJI
DOW 17,740.63 +79.92 0.45%
S&P 500 2,057.14 +6.51 0.32%
NASDAQ 4,736.1550 +19.0610 0.40%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs