Tech IPOs Set for Strong 2012

NEW YORK (TheStreet) -- While 2011 saw a frenzy of IPOs from hot Internet companies like Groupon(GRPN), Zynga(ZNGA) and LinkedIn(LNKD), 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) 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.