The recent volatility in the stock market has obviously had strong effects on many publicly traded tech companies. It follows, then, that private companies are not as eager to start trading publicly as they were before the larger financial market went into a tailspin.
Five of the 12 companies that had previously been expected to price their initial public offerings (IPOs) this week have decided to postpone their public market debuts as of Tuesday afternoon, according to the IPO calendar maintained by investment bank Renaissance Capital. Two of the five postponed companies are tech-focused: InvenSense and Cathay Industrial Biotech.
But the IPO delays this week should not come as a surprise, even to investors who are bullish about the long-term state of the market. Regardless of how optimistic they are, companies and their financial advisors typically want to make sure they enter the public markets at a relatively stable time. “I’d think in the immediate term, we will see some delays,” Morgan Keegan managing director Peter Falvey told me in an interview Monday. “I’d imagine people are going to sit tight and want to see what happens, and see if the market volatility continues.”
It bears mention that not all tech firms have shelved IPO plans for this week: Online backup software maker Carbonite and on-demand security software provider Trustwave Holdings are still on deck to price public offerings this week, according to Renaissance Capital. For the record, Internet companies Zynga and Groupon, both of which have highly anticipated IPOs in the pipeline, have not yet been penciled in on Renaissance’s online IPO calendar.
Overall, Renaissance Capital is positive that tech companies are still well-positioned to emerge relatively unscathed from the current market mayhem. The bank wrote in a blog post Monday:
“Technology has been the most popular sector for the US IPO market, representing 30% of deals priced over the last 12 months, and has also accounted for some of the most successful deals… With the financial crisis dampening broader investor interest in IPOs, these [upcoming IPO] tech deals could potentially be diamonds in the rough.”
Indeed, a number of financial experts are confident that companies in the tech sector are still good investment bets, regardless of larger economic turmoil. The question is: Will the larger investing community, which has for years seen the tech sector as a more risky investment opportunity, heed the experts’ advice?