Suddenly two venture backed technology companies have filed to go public – after a very long drought. This is a very hopeful sign, as the filings indicate that perhaps (perhaps!) the stock market is settling down enough to allow new IPOs.
The two companies, OpenTable and Medidata Systems, both have some legit venture capital backers who historically have had numerous exits from IPOs. (Bessemer and Insight, for OpenTable and Medidata, respectively.)
Some interesting take aways from these filings (I have no inside info or anything at all on these companies or their offerings, so am basing the following points on the company’s S-1′s):
- Bankers need market stability to get an IPO priced. Public market investors, such as the mutual funds who take big pieces of companies when they go public, are too skittish to buy into an IPO when the market is jumping up and down by huge % swings on a daily basis. These investors don’t want to look stupid if they catch a falling knife and get caught with too big of a chunk of a hard to trade new issue if the market is dropping. So, the bankers on these IPOs must be confident enough that the market is stable enough to get these deals prices. Let’s hope they are right.
- The issue sizes (and thus valuations) look pretty modest. OpenTable’s filing is suggesting a $40 million offering and Medidata is for an $86 million offering. Since about 20%ish of a company is usually sold in an IPO this pegs the total company values at the IPO at around $200 million and $430 million, pretty reasonable. Again, these are really rough assumptions and could prove to be not what the bankers are actually calculating!
- Both companies have good revenue scale, and importantly, have had very stable growth through the current economic issues. Stability and predictability are critical for companies going public (particularly in nasty market conditions) and both of these companies look like they have solid revenue momentum. Quarterly revenue numbers:
|
Mar 31, |
Jun 30, |
Sept 30, |
Dec 31, |
Mar 31, |
Jun 30, |
Sept 30, |
|
|
2007 |
2007 |
2007 |
2007 |
2008 |
2008 |
2008 |
|
| Medidata Revenues |
18,445 |
20,833 |
22,357 |
24,639 |
24,897 |
30,449 |
29,453 |
| OpenTable Revenues |
9,133 |
9,743 |
10,484 |
11,788 |
13,263 |
13,858 |
14,181 |
- I hope the lead banks are around to actually do the pricing… Citi on Medidata and Merrill Lynch on OpenTable!
February 4th, 2009 at 3:58 pm
A couple of closed IPOs would be good a start. Other anecdotal information suggests to me that deal (IPOs, PIPEs, and acqusitions) are starting to show some activity after a dead Q4. Two clients have talk to me about accessing the public markets and two have been talking about acqusitions (although these might fall into the category of bottom fishing). As your last paragraph suggests, one of the preconditions for good exits is predicabilty and stability in the public markets. From filing it will take a couple of months to get to the closing (assuming things go well). A leading indicator of what market players and sophisticated companies think about stability might well be the number of filings. Two per month is not enough (although it is something — see my thoughts on the subject http://www.emergingenterprisecenterblog.com/2009/… ). After all, between accountants, attorneys and other costs, filing ain't cheap, so these companies are betting real money on their prediction of the next couple or three months. Also, underwriters don't make money on pulled deals. Having said that, right now there is not much opportunity cost for an underwriter to pursue an IPO — what else would they be doing?