Tech IPOs Stuck in Holding Pattern, CEOs Say

NEW YORK ( TheStreet) -- The fallout from Facebook's ( FB) troubled IPO has spoiled the market for otherwise healthy companies looking to sell shares for the first time, technology CEOs say.

Infoblox ( BLOX) and Demandware ( DWRE) enjoyed favorable public debuts prior to the Facebook fiasco, but warn that the goalposts have shifted for companies following suit.
Facebook's IPO has shifted the goalposts for other tech IPOs.

"Unfortunately, because of all the hype about Facebook and because its IPO wasn't successful, it's going to affect other companies that have fundamentally good businesses," Robert Thomas, the CEO of Infoblox, said in an interview. "It does have a negative effect on the tech space -- investors are wary."

Infoblox, which recently posted blowout third-quarter results, made its public debut in late April during in a busy week for tech IPOs.

"In the week that we went public, Splunk ( SPLK) and Proofpoint ( PFPT) also went public," Thomas said. "There was high sentiment about tech companies -- you would have expected Facebook to accelerate that sentiment, as opposed to collapse it."

Reports emerged this week that online travel specialist Kayak had stalled its push toward an IPO. Citing people familiar with the matter, The Wall Street Journal reported that Kayak didn't launch its IPO "roadshow," which had been expected to start around Memorial Day.

Kayak declined to provide comment for this story.

Scott Sweet, senior managing partner at IPO advisory firm IPO Boutique, described the Facebook offering as nothing short of a "disaster."

"I have never seen anything like it," he said in an interview. "Facebook has really cost investors, in some cases, millions -- they have little love for lead underwriter Morgan Stanley ( MS)."

Until the Facebook share sale, 2012 had been a good year for tech IPOs. Prior to the Facebook offering, IPO expert Renaissance Capital said tech firms have accounted for 20 U.S. IPOs valued at more than $50 million each this year, the most in any sector. Last year there were a total of 48 tech offerings.

Firewall maker Palo Alto Networks and cloud specialists Reval and ServiceNow all filed S-1s with the Securities and Exchange Commission recently. But IPO Boutique's Sweet doesn't anticipate any initial share sales soon. Companies gearing up for IPOs, he says, are "kind of in a holding pattern."

Palo Alto Networks, Reval and ServiceNow haven't yet responded to requests for comment on this story.

"It looks like several weeks without an IPO," Sweet said. "There's not a single IPO in the entire pipeline that has a filing range."

Tom Ebling, the CEO of newly public Demandware, also notes a post-Facebook hangover in the IPO market.

"I think, undoubtedly, there will probably be some time period where maybe investors will be a little gun shy," he said in an interview. "I hope that that will bounce back quickly."

Demandware went public in March, pricing its IPO at $16 a share. Since then, shares of the cloud-based e-commerce platform have gained more than 25%, aided by strong first-quarter results last month.

"Many of our peers that have done IPOs in the past six months have had positive earnings results," Ebling said. "If we keep doing that as a group, it will help investor confidence."

Big-data specialist Splunk ( SPLK), which enjoyed an 80% revenue increase in its first post-IPO quarterly report on Thursday, carefully planned its offering to avoid Facebook.

"We had our own timeline for our IPO that was designed to go out in front of Facebook," Godfrey Sullivan, Splunk's CEO, said in an interview. "Not because we thought that it would go up or down, but because we thought there would be so much news about it."

"We wanted to meet with investors and have them pay attention to our story," he said. "I'm glad that we got out first, not because of any change in the IPO climate, but because we wanted to get our message out with clarity."

--Written by James Rogers in New York.

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