IPO

30-Year Low in IPOs Suggests Pent-Up Demand

Dave Kellogg

— 1 min read
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See this article on Bloomberg, entitled Fewest US IPOs Since 1979 Mean Pent-Up Demand.

Excerpt:

More than 200 U.S. companies are planning to go public, according to the firm. Only two, Home Bancorp Inc. and Grand Canyon Education Inc., have done so this quarter.


While I hate to be Pollyanna, I do firmly believe that the IPO market is highly cyclical and thus that one of the best indicators of a future open IPO window is the closure of the present one.  And, while I don't have data to support it, I'd generally agree with the elastic rebound theory idea that the longer the window has been closed the more companies will flow through it when it opens.

In my experience, it takes two things to go public:

  • Above-bar financials.  There is typically some bar (usually found by examing recent deals) which would-be public companies must surpass regarding financial performance. For example, I think the current bar is roughly 75/50/0 -- i.e., $75M+ in trailing twelve months revenues, 50%+ in growth rate, and 0% EBITDA.
  • An open IPO window.

The trick is, of course, having both at the same time.

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