Can Venture Thaw the IPO Ice Age?

Article excerpt

Government policy makers can add first-quarter initial public offering totals to their list of embarrassments. Federal Reserve deflation, the highest tax burden since World War II, and de facto nationalization of broadband access have slowed the economy and crashed markets.They have also shut the window on companies looking for public capital infusions.


In March, three key optical networking firms, two innovative semiconductor companies, and numerous software and biotech ventures withdrew their Securities and Exchange Commission S-1 filings. For the year, 79 IPOs have been withdrawn. Include December withdrawals by companies looking to go public in early 2001 and that number swells to 110. Only the March spin-off of Lucent's microelectronics group, Agere Systems (AGRa), could spare the quarter total humiliation. At $3.6 billion, it was the fourth largest IPO ever in dollar terms, but the offering was far from a success. Agere originally hoped to raise $6.5 billion for its operations, which include semiconductors, optical components, and tunable lasers.

Excluding Agere (pronounced "a gear"), 16 first-quarter IPOs raised just $4.5 billion. That's the worst showing since 1989 with just 12 first quarter offerings. And we know what happened to the economy in 1990. Since 1980, an average of 74 first-quarter IPOs have raised an average of $6.1 billion, unadjusted for inflation. Forgone proceeds from abandoned offerings total well over $10 billion this year.

From Optical Micro Machines, a maker of silicon micro-mirrors used in optical switching, to WaveSplitter, a young leader in wavelength division multiplexing, and from International Microcircuits, an upstart competitor to Texas Instruments, to Conexant's network chip spin-off, important companies are being turned away from the public markets. Even last month's feature company, Chorum Technologies, had to withdraw.

At the Optical Fiber Communications conference in Anaheim, Chorum's Mike Decelle told me that SEC rules discourage companies from leaving IPO filings in play until the market bounces back. Companies must periodically update those filings. And as telecom spending slows with the economy, it's likely that last quarter's revenues, which must be reported, are less than stellar. Few companies enjoy issuing new figures implying much lower valuations, so they go back "underground." The rules also prohibit companies on file from raising private capital while they wait to go public. …