Silicon Insider: The Return of the IPO?
Feb. 6 -- What was the most important piece of business news last week? No, it wasn't Enron.
In fact, as with many small but portentous events, you may not have noticed it at all. Certainly most of the media missed it. What was this earth-shaking event? The initial public offering of stock from a small company you've never heard of named Synaptics. It makes personal computer touchpads.
So? You're probably saying, "What's the big deal about that?" The last five years have seen thousands of IPOs by small tech companies nobody's ever heard of — hundreds of them in Silicon Valley alone.
Yeah, but not lately — and especially not since Sept. 11. And that's the point.
Ever since the dot-com bubble burst, it's been well-nigh impossible to take a high technology company public.
The markets were not only burned badly by the Pets.coms and Boo.coms of the world, but as the economy slumped they also began to doubt the near-term viability of any small technology company. As a result, the traditional rite of passage by which a young company passes from private to public ownership has been frozen.
This might seem like no big loss. After all, "going public" was widely abused by fast-moving start-ups as a way for the founders to cash out millions by dumping their hollow, doomed companies on small shareholders like pensioners, CNBC watchers and other poor suckers. So good riddance to that con job called Going Public Day.
Tarred with the Bubble’s Brush
But there are a couple problems with such a sweeping indictment. First of all, the events of the dot-com bubble were aberrations in a long and noble history of initial stock offerings. It tars with the same brush the multitudes of real, well-managed and enduring companies (you know: General Electric, IBM, Intel, Microsoft, Hewlett-Packard) that went public in order to raise the hunk of capital they needed to grow to the next stage in their development.
Very few companies can grow to a billion dollars in sales or more without a massive injection of cash — for new product development, marketing, factories. They just can't do it on profits alone. Take away the IPO (and secondary offerings in later years) and most of those great companies — and their hundreds of thousands of jobs — would not exist.
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