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Two-speed IPO Pipeline Emerges

09 December, 2011

Three US initial public offerings were postponed on Thursday, but Zynga is to press ahead with its plan to list next week, in further evidence of a two-speed market in IPOs.

Many start-up companies have matured into sizeable companies in the years since the financial crisis began in 2008, resulting in the longest pipeline of IPOs in the US since the dotcom boom. But investor demand has not kept pace this year, and there has been a surge in the number of cancelled, postponed and withdrawn deals.

Some sectors, notably internet companies, remain on investors’ wish lists. Zynga, the maker of games for social networks and mobile devices, still plans to move forward with an initial public offering next week, as does Jive Software, which makes social networking software for businesses.

They will follow hotly anticipated names such as Groupon and LinkedIn into the public markets, despite those IPOs seeing declines in their share prices post-issuance amid fears of overvaluation due to artificially small floats of shares.

But the delays on Thursday for Peak Resorts, a ski holiday group; HomeStreet, a community bank; and WhiteSmoke, a language software-maker, brought the number of delayed deals this year to 84, the highest since 2008, according to Ipreo, a capital markets data and advisory provider.

“High flying pre-IPO companies…did little to break the gloom surrounding equity markets,” said Nicholas Colas, chief market strategist at ConvergEx Group.

“An equity capital markets environment where hundreds of new companies can make it out the door would be a positive for market sentiment. A handful of social networking companies getting into public hands does not,” he added.

There is still an expected year-end rush next week, with 11 companies hoping to debut. That is likely to be the last week of the year for issuance, since it takes about two weeks to market an IPO, and few deals price during the last two weeks of the year.

If all are successful, it would be the busiest week for US IPOs since 2007, according to Renaissance Capital, a research firm.

With those deals, 2011 would see a total of 130 US IPOs, according to Renaissance, 16 per cent fewer than in 2010, raising $37.2bn, below the $38.7bn raised last year.

Many of the most anticipated public offerings, including web groups Facebook, Yelp and Twitter, have been postponed until next year.

Earlier this week, LivingSocial, the online coupon seller and competitor to Groupon, said it was raising $400m in private markets, an indication that many companies are pursuing alternatives to going public.

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Two-speed IPO Pipeline Emerges

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