In the first half of 2011, a variety of cleantech firms both filed for IPOs and made their debuts on the public markets. But in the wake of the market sell-off this week, that IPO window could be swiftly shutting.
The stock market has been tanking, thanks mostly to the downgrade of the U.S. credit rating by Standard & Poor last Friday and more debt troubles in Europe in the past few days. Stocks surged a bit on Tuesday, but not enough to make up for the drop on Monday for public cleantech companies across biofuels, batteries, smart grid and solar sectors.
Uncertainties about the economy and where the market is headed already have prompted at least eight general technology companies – though none with a greentech focus – to postpone their plans to hold an initial public offering this week, according to Renaissance Capital’s IPO calendar.
But greentech companies that went public in the past two years, such as lithium-ion battery manufacturer A123 Systems (s AONE), car sharing company Zipcar (s ZIP) and biofuel producer KiOR (s KIOR), are seeing their stocks getting battered.
According to a report in VentureWire, some cleantech investors are starting to move more cautiously. A greentech company that could have gone public a month ago, might have to wait several more months now and then go public at a lower valuation, Gary Vollen, head of clean-technology investment banking at R.W. Baird, told VentureWire.
Investors had been hoping 2011 would be a strong year for cleantech exits and in particular IPOs. Companies that received funding more than five to seven years ago are maturing, and the venture capitalists that invested in them are eager to get returns out of them. Kleiner Perkins’ Partner Ray Lane told us last month he expects six to eight IPOs from the firm’s portfolio companies within the next two years.
The IPO window appeared wide open in the first half of 2011. Biofuel maker Gevo (s GEVO) started trading in February; Zipcar (s ZIP) started trading in April, algae maker Solzayme (s SLZM) started trading in May; and biofuel company KiOR (s KIOR) started trading in June.
In addition, companies that have filed papers for IPOs (but not yet traded) include solar equipment developer Enphase Energy, smart grid tech company Silver Spring Networks, biodiesel producer Renewable Energy Group, and solar power plant developer BrightSource Energy. VentureWire reported that electric car company Fisker Automotive, and biofuel company Genomatica had also hired bankers to investigate the IPO process.
But it’s seemed apparent to some of these companies that the IPO window has been slowly closing. KiOR, in particular, wrote to the Securities and Exchange Commission asking them to expedite the process of its filings on June 22. Perhaps the company’s investors and underwriters were worried that an IPO would be less successful the longer they waited.
With the economy remaining relatively weak, the continuing political tussles over the federal budget, and debt problems plaguing the U.S. and European countries such as France, it will take some time to restore investor confidence. Perhaps more time than previously expected, and we could see some of the companies that have indicated they plan to go public delaying those debuts.
Any perceived weakness in IPO land will have a rippled effect on private fundraising efforts. Already, some VCs have pulled away from greentech partly because greentech can take more time and money to nurture than they anticipated and partly because the explosive growth and valuations of Internet companies such as Groupon reminded them that, oh yeah, you can make better returns by investing in online startups.