The biggest tech IPO of the year was phone conference services provider West Corp.'s $425.5 million deal on March 21, followed by ad-tracker Marin Software's $120.8 million deal the same day, enterprise software developer Model N Inc.'s $120.1 million deal March 19 and enterprise software developer Rally Software Development's $96.7 million deal April 11. Techs represented a paltry 10% of the total IPO volume in the first quarter and only 14% of the number of deals. That compared with 22% of the volume and 31% of the number of deals in the first quarter of 2012. The share of tech IPOs also was lower than in the fourth quarter when tech IPOs accounted for 14% of the volume and 16% of the deals. The shares were the lowest since the third quarter of 2011 when tech accounted for only 5% of volume and 14% of deals. "It's not a reflection of a lack of appetite from institutional investors," said Charles Mather, the head of equity capital markets at investment bank Janney Capital Markets in New York. "In the second half of March, a lot of deals actually got done. It's more a reluctance of issuers, because of a hangover from the Facebook IPO."
Mather said he is optimistic that IPOs in general and tech IPOs in particular will make a comeback in the rest of 2013 because "the performance of the deals that have been done has been strong."
"The 'tweet retreat' is only the latest example of investor fears," Mather said, citing a hacked tweet of an Associated Press story on April 23 about a supposed bombing at the White House. It erased $136 billion of value from the S&P 500 before it could be corrected. "We'll see a lot more tech IPOs this year," Mather said. "Whether they represent as large a share as other sectors is another matter." IPOs by real estate investment trusts and energy master limited partnerships have become fixtures in the IPO market, and tech IPOs may not been able to overtake their position, he said. Most likely, tech IPOs will continue to underperform these emerging sectors "because we don't have another Facebook"-type IPO waiting in the wings. In the meantime, some tech executives have eschewed IPOs in the current anti-Facebook climate and sought to raise significant amounts of capital from private placements.
"When you think about technology, so much of the developments have been around computing power," Marlett said. "People don't buy computers any more. You're seeing people do things on the cloud. Personal computers and software are dead. And social media maybe isn't what we thought it was cracked up to be."