Facebook ripple on IPO market already felt

Fri May 25, 2012 6:02pm EDT

(Reuters) - The ripple effects of Facebook Inc's botched IPO appear to already be hitting the market for initial public offerings as two companies this week pushed back their market debuts.

PC hardware components maker Corsair Components Inc postponed its $78 million IPO citing market conditions, as did laser hair removal products maker Tria Beauty Inc,which intended to raise $64 million.

The delays may be just the first of many, say market observers, as volatile equity markets and fallout from the Facebook debacle create a challenging climate for new offerings. Fewer issues will mean less income for underwriters, who already had been strapped by an anemic market for deals. It also will mean that companies which go ahead with offerings will need to accept lower valuations.

Facebook's IPO fizzled as the shares fell below the offering price, hit by technical glitches on Nasdaq that disrupted first-day trading and drawing lawsuits targeting underwriters for selectively sharing changes made to analyst forecasts.

Shares of Facebook, the most highly anticipated IPO this year, closed Friday at $31.91, 16 percent below the social networking firm's offer price of $38.

"When you have a massive flop like Facebook it's going to persuade investors to stay on the sidelines for even longer," said Lee Simmons, industry specialist at Dun & Bradstreet. "It doesn't give a lot of hope to investors that the markets are prime for a comeback."

A slowdown further wounds an already tenuous U.S. market for new issuers. Only 17 U.S. IPOs have priced so far in the second quarter, compared with 27 during the same period last year, according to IPO research firm Renaissance Securities. Meanwhile, 18 companies have filed IPO registration statements, a 74 percent decline from last year.

Companies which do choose to hit the public markets may have to adjust their valuation expectations, said David Menlow, president of IPO Financial.com, which tracks public offerings.

"Anything that is out there is going to be subject to a valuation haircut," he said. "A company that was looking at an $18 to $24 price range could now be looking at price at $14 or $15."

New issuers are also likely to face heightened scrutiny.

"Everyone from underwriters to investors is going to be looking carefully at new issuers," said Dan Bradley, an associate professor at the University of South Florida's College of Business. "After all the hype with Facebook, there's going to be some lessons learned."

Several high profile tech companies which have filed for IPOs including IT management software company ServiceNow and security software company Palo Alto Networks have not delayed their plans, Reuters has previously reported. Other large offerings expected this year include software company Workday, crafts retailer Michaels Stores Inc and real estate investment trust Empire State Realty Trust Inc.

There are no IPOs currently scheduled for next week amid the 186 companies in the pipeline, according to Scott Sweet, managing partner of IPO Boutique, although a summer slowdown after Memorial Day weekend may have also contributed to this lack of new offerings.

"IPO market shut. See you in 2013," tweeted Barry Silbert, chief executive of SecondMarket, a platform that allows employees of private companies to sell shares.

(Reporting By Olivia Oran; Editing by Alwyn Scott and Kenneth Barry)

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