A few months ago, it looked like the tech industry’s initial public offering window had slammed shut. But thanks to a year-end rally started by Groupon and rounded out by Zynga’s $ 1 billion stock market debut, it looks like 2012 could be a big year for the tech IPO market, according to a new report by PriceWaterhouseCoopers (PwC).
As of the end of last week, the fourth quarter of 2011 had seen 28 IPO pricings on the U.S. stock market, according to PwC’s quarterly IPO Watch survey. Technology companies were responsible for a solid chunk of those, as the sector has contributed eight of the 28 total offerings in the quarter thus far. The IPO activity surged more as the year’s end drew closer. Three IPOs priced in October, fourteen in November and eleven in December. Notably, the tech sector may have spurred on the rest of the economy: November’s surge in activity was “initiated by the highly-anticipated Groupon IPO,” PwC said.
The technology sector was also characterized by the monetary heft of its offerings. The average deal size of a tech IPO during the fourth quarter of 2011 was $ 292.5 million, nearly triple the average deal size for tech IPOs one year ago.
Now, while the tech sector did well from all angles during Q4 2011 when it came to IPOs, tech stocks’ life after the IPO has been a bit shaky. Groupon’s share price has vacillated pretty dramatically from $ 14.85 to 31.14 in its first six weeks on the market, and Zynga’s share price dipped below its $ 10 IPO price within its first ten minutes of trading and has languished in that realm in the few days since. But it’s still too early in their lives as public companies to say whether they’re truly strong or weak, and the fact that Groupon and Zynga made it out the IPO gate at all spells success for the founders and venture capital investors who backed both companies from their startup days.
Also, it bears mention that the overall IPO market for industries beyond technology is still much weaker than 2010. But as far as the tech world is concerned, the data shows we may be in the beginning of an IPO wave — and if so, it is not likely to halt once the year closes. “The surge in activity and relative strength in the number and diversification of industries in the IPO pipeline are early signs of a healthier IPO market in 2012,” PwC said in the report.
Below are PwC’s graph representations of the overall IPO market (click to enlarge):
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