Live Discussion Transcript: IPOs in 2010 - The Great Thaw?

On Monday (1/11/09), we hosted a live discussion on the topic of IPOs in 2010. Here were the participants and some of their recent writing on the IPO market - read an edited version of the discussion here, or view the unedited transcript in the box below:

Paul Kedrosky is an investor, speaker, writer and entrepreneur. He was one of the first technology equity analysts at a major brokerage firm, and now is an active investor in private and public tech companies. Paul's recent articles on IPOs:

The 2010 Tech IPO Boom • Charting Hong Kong's IPO Dominance

Paul Bard is Vice President at Renaissance Capital LLC, which provides independent research and investment management services on newly public companies. Recent articles from Renaissance:

IPO Market Ready for a Return in 2010 • Venture-Backed IPO Market Comes Back to Life

Bill Simpson is an independent investor and newsletter author who focuses on the IPO market. Bill's outstanding analyses of new issues are regular must-reads on SA. Bill's recent articles:

Team Health Holdings' IPO Seems Priced to Work • 7 Days Group Goes Public at a Very Reasonable Valuation

~ Mick Weinstein, Editor in Chief of Seeking Alpha

IPOs in 2010: The Great Thaw?

(01/11/2010)

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2:59	Mick Weinstein, SA Editor: Hi all, we'll begin soon, when our panelists are signed in. Monday January 11, 2010 2:59 Mick Weinstein, SA Editor

3:00	Paul B.: I'm here. Monday January 11, 2010 3:00 Paul B.

3:00	Bill Simpson: I am here also Monday January 11, 2010 3:00 Bill Simpson

3:01	Mick Weinstein, SA Editor: while we're waiting for Paul K I'll explain the format Monday January 11, 2010 3:01 Mick Weinstein, SA Editor

3:02	Paul Kedrosky: I'm here (Paul K that is) Monday January 11, 2010 3:02 Paul Kedrosky

3:02	Mick Weinstein, SA Editor: for the first portion, we'll have an open discussion among the panelists - Hey Paul! Monday January 11, 2010 3:02 Mick Weinstein, SA Editor

3:02	Mick Weinstein, SA Editor: and for the second, we'll bring in some questions from readers Monday January 11, 2010 3:02 Mick Weinstein, SA Editor

3:03	Mick Weinstein, SA Editor: let me start things off by expanding a bit on some of the articles you've all written on IPOs in 2010 Monday January 11, 2010 3:03 Mick Weinstein, SA Editor

3:03	Mick Weinstein, SA Editor: Both Paul K and Paul B have written that there's a chance that we'll see a big revival in the IPO market this year. What do you see as the catalysts for this at this point? Monday January 11, 2010 3:03 Mick Weinstein, SA Editor

3:04	Paul Kedrosky: 1) Improving general confidence in capital markets. 2) Maturity (revenue/profit) of companies in private market. 3) Prospects for a few breakout IPOs (a Netscape moment) catalyzing things. Monday January 11, 2010 3:04 Paul Kedrosky

3:05	Bill Simpson: Paul, do you expect to see Facebook and/or Twitter come out this year? Monday January 11, 2010 3:05 Bill Simpson

3:05	Paul Kedrosky: The mistake people make in looking at IPO market is to talk in terms of "windows" or "averages". Both are silly. IPO market is episodic by its nature. Monday January 11, 2010 3:05 Paul Kedrosky

3:06	Paul B.: I agree with Paul K's assessment . . . although I would add that I think there is currently a confluence of two key forces that will help power what we would characterize as a "growth IPO" revival Monday January 11, 2010 3:06 Paul B.

3:06	Paul Kedrosky: To Bill (I don't know how to tag a reply as direct), I expect a Facebook IPO in 2010. 20% chance of Twitter too. Monday January 11, 2010 3:06 Paul Kedrosky

3:07	Mick Weinstein, SA Editor: Paul B, what are those two forces? Monday January 11, 2010 3:07 Mick Weinstein, SA Editor

3:07	Paul B.: The first is on the supply side (to answer Bill's question -- Yes I do think we will see Facebook). . . Twitter is more of a wildcard given their stage of development at this point Monday January 11, 2010 3:07 Paul B.

3:07	Paul Kedrosky: Is there a way for me to upload a graph? If so, I would. Monday January 11, 2010 3:07 Paul Kedrosky

3:07

Paul B.: So on the supply side, there probably has never a been a time when there have been as many mature VC-backed companies – companies with a combination of proven profitability and strong growth prospects . . . VCs are also facing pressures to return funds to their LPs . . . so that represents an added nudge Monday January 11, 2010 3:07 Paul B.

3:08

Bill Simpson: The performance of the small and mid cap tech ipos over the past year have been quite solid. That has really opened the door for a number of similar tech ipos in 2010. A number of under the radar tech deals have performed extremely well. Solar Winds and Fortinet are two examples. Monday January 11, 2010 3:08 Bill Simpson

3:08	Bill Simpson: should allow for a number of these VC backed tech companies to come out in 2010 Monday January 11, 2010 3:08 Bill Simpson

3:08	Paul B.: Many of these companies made the strategic decison in late 2008/early 2009 (with advice from their VCs) to hold off on moving ahead with an IPO -- I guess it can debated whether or not the market would have been accepting Monday January 11, 2010 3:08 Paul B.

3:08	Paul Kedrosky: Pace Paul B and Bill, these are all the pieces we need, successful recent examples, mature privates, and appetite. All the pieces are there. Monday January 11, 2010 3:08 Paul Kedrosky

3:09	Paul B.: In any case, the supply of these companies is there and now ready to move forward Monday January 11, 2010 3:09 Paul B.

3:09	Paul Kedrosky: There is an important caveat tho. Monday January 11, 2010 3:09 Paul Kedrosky

3:10	Paul Kedrosky: First, the IPO eco system has changed dramatically. There four IPO horsemen are gone. Monday January 11, 2010 3:10 Paul Kedrosky

3:10	Paul B.: On the demand side (which few have been talking about -- although Paul K has alluded to this in his posts) --- institutional investors are craving growth and new ideas Monday January 11, 2010 3:10 Paul B.

3:10	Paul Kedrosky: Second, the amount of capital invested in private cos has shrunk, so trade sale exits can be cheaper and faster than IPOs. Monday January 11, 2010 3:10 Paul Kedrosky

3:11	Paul Kedrosky: To Paul B., yes, that is important. Institutional investors badly want new ideas -- meaning new equities. Monday January 11, 2010 3:11 Paul Kedrosky

3:11

Paul B.: As Bill talked about, "growth" IPOs had little trouble pitching themselves in 2009 -- in fact if you look at the 15 or so tech IPOs completed in 2009, all priced within or above their ranges and have produced returns averaging close to 30% -- huge outperformance relative to the rest of the IPO landscape Monday January 11, 2010 3:11 Paul B.

3:12	Bill Simpson: I have been impressed with the quality overall of the tech deals we've seen recently also. Monday January 11, 2010 3:12 Bill Simpson

3:12	Mick Weinstein, SA Editor: re. the growth companies, do you think they'll get a 'recession discount' for performance over the past year or two? Monday January 11, 2010 3:12 Mick Weinstein, SA Editor

3:13	Bill Simpson: oddly I don't believe they will. As Paul B noted, the tech growth companies that came public in '09 all priced strongly Monday January 11, 2010 3:13 Bill Simpson

3:13

Paul B.: I agree with Paul K that to some extent structurally Wall Street has changed/adapted, but I'm not convinced that this is the reason we are not seeing IPOs -- investment banks will not turn business away -- particularly of the quality that is out there in the VC-backed community. I beleive the negating factor has been more from the good companies not wanting to go until now Monday January 11, 2010 3:13 Paul B.

3:13	Bill Simpson: We are seeing the discounts in the more mature private equity deals coming public, but not the growth names Monday January 11, 2010 3:13 Bill Simpson

3:13	Paul Kedrosky: Yes, I don't see a discount in growth names at all. If anything, a premium. Monday January 11, 2010 3:13 Paul Kedrosky

3:14	Paul Kedrosky: The key -- and you can't say this often enough -- is a few big early successes. It takes nothing to deflate investors' risk appetite if we have a few early flops. Monday January 11, 2010 3:14 Paul Kedrosky

3:14

Paul B.: Also, institutional investors were busy picking up large cap companies on the cheap in 2009 as the markets rallied strongly . . now that valuations are back to more normal levels (or perhaps full), they will focus there attentioni more on the IPO market. Monday January 11, 2010 3:14 Paul B.

3:15	Paul Kedrosky: That was the point of my repeated refrain of a "Netscape moment", which is what Facebook, or Linkedin, etc. can represent to markets. Monday January 11, 2010 3:15 Paul Kedrosky

3:15	Mick Weinstein, SA Editor: to both Pauls - why are you convinced that Facebook will do their IPO this year? Monday January 11, 2010 3:15 Mick Weinstein, SA Editor

3:16	Paul Kedrosky: IPO markets -- when they yawn open -- are inherently emotional, requiring a catalyst, and requiring junior i-bankers to be told by senior i-bankers to be told by investors "get me more of those!". Monday January 11, 2010 3:16 Paul Kedrosky

3:16	Paul B.: As Paul K has talked about, Facebook is making all the tell-tale signs of going ahead with an IPO. . .also with an $11B valuation (if that is accurate), few companies could actually acquire them Monday January 11, 2010 3:16 Paul B.

3:17	Paul Kedrosky: Right, Paul B. has it. They are making personnel moves in that direction, we're seeing the usual private market signs -- unnecessary raises at high valuations -- and, most importantly, they (apparently) have the numbers. Monday January 11, 2010 3:17 Paul Kedrosky

3:17	Paul Kedrosky: To that point, keys to watch for are always pub markets finance hires, strange raises from late-stage funds at high valuations, etc. Those are the giveaways. Monday January 11, 2010 3:17 Paul Kedrosky

3:17	Paul B.: If you are company with venture backers and several hundred million in sales . . exactly PAUL K! . . . also the dual class share structure speaks volumes about their intentions Monday January 11, 2010 3:17 Paul B.

3:18	Mick Weinstein, SA Editor: we haven't of course seen FB's finanicals or deal terms for IPO, but if it were priced in line with some recent growth co's, would you be inclined to invest? Monday January 11, 2010 3:18 Mick Weinstein, SA Editor

3:18	Paul B.: So for Facebook, the question is really when no if and barring a major disaster in the equity markets Facebook is prime IPO candidate Monday January 11, 2010 3:18 Paul B.

3:19	Bill Simpson: I expect a valuation for Facebook out the door far exceeding the recent tech ipos Monday January 11, 2010 3:19 Bill Simpson

3:19	Paul Kedrosky: Mick: I would, but remember that I bought Google on IPO and sold at $120. Monday January 11, 2010 3:19 Paul Kedrosky

3:19	Mick Weinstein, SA Editor: heh, that seemed like an awfully inflated price then... I remember Monday January 11, 2010 3:19 Mick Weinstein, SA Editor

3:20	Paul B.: A Facebook IPO would be in huge demand by institutional investors . . . Monday January 11, 2010 3:20 Paul B.

3:20	Paul Kedrosky: Let's not fixate on Facebook, either. Linkedin is likely as well, plus many others. If you spelunk in private portfolios the revenue dumbers can be surprising, with many at $50m-plus. Monday January 11, 2010 3:20 Paul Kedrosky

3:21	Paul Kedrosky: As an outlier, I'm expecting strong push for SarbOx reforms this year. That would create more momentum. Monday January 11, 2010 3:21 Paul Kedrosky

3:21	Mick Weinstein, SA Editor: so Paul B, at this stage you think institutional investors would *have* to get in on these deals? Monday January 11, 2010 3:21 Mick Weinstein, SA Editor

3:21

Paul B.: Recall that with Google, their earnings power ended up being 3-4x the initial forecasts at the time of its IPO . . that is what made it so successful. It will be interesting to see how conservative/aggressive expectations will be for Facebook's growth/earnings Monday January 11, 2010 3:21 Paul B.

3:22	Paul Kedrosky: The stuff to run from as IPOs comes across transom are Mortgge REITs, SPACs, and such. That is old-word, financial engineering, mostly David Copperfield trickery and should be shunned. Monday January 11, 2010 3:22 Paul Kedrosky

3:22	Bill Simpson: agree 100% Paul, I avoid those two groups across the board Monday January 11, 2010 3:22 Bill Simpson

3:23

Paul Kedrosky: To Paul B.: That is my convern with Facebook. Where is the leverage here at public co.? The optimist in me sees Fbook as a kind of Mastercard/Visa of next gen tech: a platform for transactions globally, whther micro-payments, or apps sales, or whatever. Monday January 11, 2010 3:23 Paul Kedrosky

3:24	Mick Weinstein, SA Editor: Paul K, why would SarbOx reform suddenly happen this year? Monday January 11, 2010 3:24 Mick Weinstein, SA Editor

3:24

Paul B.: Yes Mick, that type of thinking will happen to some extent, Facebook would represent one of a few (if not the only) pure plays on the social networking space . . although we can debate weather or not it deserves it's own "industry" category, the fact is that the scarcer a business or stock is the greater the interest (assuming it's a business investors believe in) Monday January 11, 2010 3:24 Paul B.

3:25

Paul Kedrosky: Mick: The Obama administration is under pressure for job creation, talking a better game on entrepreneurs and job creation from growth companies. It is a natural next step to facilitate the going public process for such companies. I keep hearing Congressional/Admin buzzing. Monday January 11, 2010 3:25 Paul Kedrosky

3:26	Mick Weinstein, SA Editor: Lots of talk of private equity-driven IPOs this year - what do all you think of that as a catalyst? Monday January 11, 2010 3:26 Mick Weinstein, SA Editor

3:26	Paul Kedrosky: Lots interesting smalelr companies to watch for too, like Yelp which may show up in pipeline as this gets going. Monday January 11, 2010 3:26 Paul Kedrosky

3:27	Paul Kedrosky: Recall, Yelp aborted an alleged Google acquisition not long ago. That doesn't happen unless a better option comes along ... like the public markets at a higher price. Monday January 11, 2010 3:27 Paul Kedrosky

3:27	Mick Weinstein, SA Editor: I mean outside of VC alone... Monday January 11, 2010 3:27 Mick Weinstein, SA Editor

3:27

Paul B.: Paul K, the value in Facebook will be its massive sticky user base and the types of services it can then layer on top . . which can probably be a number of things. Leverage should be huge from a sales/marketing perspective and even R&D. THe key will be what type of capital investment has been required to maintain/grow their business -- i.e. how much they are spending on capex. Think about how much more profitability google would be if it didn't spend $billions on its data centers/servers -- these companies require big computing infrastructure Monday January 11, 2010 3:27 Paul B.

3:27	Bill Simpson: Mick, it all depends how much of a discount they price the private equity deals. Most of them are debt laden and need nice discounts to work Monday January 11, 2010 3:27 Bill Simpson

3:27	Paul B.: We expect a continued flow of PE-backed IPOs as well, but the pricing/trading dynamics will be different Monday January 11, 2010 3:27 Paul B.

3:28	Paul Kedrosky: Mick: I cordially loathe most PE IPOs. They generally debt-burdened, cynical, over-engineered, and get-rich-quick schemes. They are no catalyst, other than for panicky PE GPs who want to raise their next fund. Monday January 11, 2010 3:28 Paul Kedrosky

3:28	Bill Simpson: we should also see a number of non-VC backed China deals as well. I think you can put the 2010 ipos in a few broad areas. 1 - The VC backed growth companies, 2- the Private Equity related deals and 3 - the smaller China ipos. Monday January 11, 2010 3:28 Bill Simpson

3:28	Paul B.: 13 of the 22 private equity IPOs in 2009 priced below their initial expected ranges -- so clearly there is a lot of valuation sensitivity on the part of investors. Monday January 11, 2010 3:28 Paul B.

3:29	Mick Weinstein, SA Editor: On Bill's cue, let's talk about China a bit.. Hong Kong led in new issues last year (by money raised) and Shanghai was relatively strong too. Will those trends continue this year? Monday January 11, 2010 3:29 Mick Weinstein, SA Editor

3:29	Paul Kedrosky: Paul B.: As there should be on PE IPOs. Investors have learned that there is much there than meets the financial eye. Too many balance sheet and income statement tricks. Monday January 11, 2010 3:29 Paul Kedrosky

3:29

Bill Simpson: they finally discounted some of the PE deals enough to work late in the year...and every now and again there is a good one in there. Usually though I skip any deal in which 20%+ of operating profits go to service debt...and too many of the PE deals fall into that. Monday January 11, 2010 3:29 Bill Simpson

3:29	Paul B.: The more leveraged, slower-growing PE deals will face the most valuation pressure. . . others that have a growth angle (a la Dollar General) will be the most successful Monday January 11, 2010 3:29 Paul B.

3:30	Paul Kedrosky: Turning to China, as Master Mick asks, I'm admittedly uneasy. Recent IPOs have seen uneven reception, hugely levered to state spending, and bubble-iciious valuations. Monday January 11, 2010 3:30 Paul Kedrosky

3:30	Paul B.: The good news is that the PE-backed IPOs have performed reasaonable well in the aftermarket -- so the discounted pricing has worked at least initially Monday January 11, 2010 3:30 Paul B.

3:31	Monday January 11, 2010 3:31

3:31	Paul B.: Agree 100% with Paul K. Peformance from China has been interesting given the fact that they have fallen on opposite ends of the spectrum -- they dominated the list of best performers as well as the list of worst performers in 2009 Monday January 11, 2010 3:31 Paul B.

3:31	Mick Weinstein, SA Editor: that's a graph from Paul K Monday January 11, 2010 3:31 Mick Weinstein, SA Editor

3:32	Paul Kedrosky: Thanks Mick. That graphic from Grant Thornton shows how flat the new issues market has been in the U.S., esp compared to elsewhere. It speaks to underlying drivers for institutional appetite for new offerings. Monday January 11, 2010 3:32 Paul Kedrosky

3:32	Paul B.: Investors really need to do their homework -- just because it is a Chinese company, it doesn't necessarily mean it is a slam dunk Monday January 11, 2010 3:32 Paul B.

3:32	Paul Kedrosky: To be clear, not new issues, but total listed companies on U.S. markets vs elsewhere. We have gone through an epic of ticker consolidation. Monday January 11, 2010 3:32 Paul Kedrosky

3:33	Paul Kedrosky: For anyone curious about my "Netscape moment" thesis, this is the piece I wrote about it http://www.techcrunch.com/2009/12/21/ipo-crazy-startups/ Monday January 11, 2010 3:33 Paul Kedrosky

3:33

Paul B.: Going back to the SOX issue, we agree that the rules should be moderated and are overly cumbersome for small issues, but I don't believe they are to blame the current lack of IPO activity -- there are plenty of VC-backed companies that have the financials in place to go public today Monday January 11, 2010 3:33 Paul B.

3:34	Paul Kedrosky: Paul B.: Totally agree. Blaming SarbOx for IPO death is like blaming square grooves for my crappy golf game. But there is a sentiment/confidence issue that could help. Monday January 11, 2010 3:34 Paul Kedrosky

3:34	Paul B.: To Paul K: about your Netscape moment (btw, I'm a huge fan of The Big Lebowski -- great post!) . . . do you really think there is enough supply out there to create a "wave" of activity without compromising quality? Monday January 11, 2010 3:34 Paul B.

3:35	[Comment From Abbi Abbi : ] How do you do your homework on China IPOs? Where do you get reliable information about these companies? Monday January 11, 2010 3:35 Abbi

3:35	Paul Kedrosky: Paul B.: Like all such waves, this will contain good and bad and will end when the supply is mostly bad. But there is enough to get things going, which is something we haven't been able to credibly say in some time. Monday January 11, 2010 3:35 Paul Kedrosky

3:36	Bill Simpson: Abbi, those listed in Hong Kong will generally have financials in English on their corporate web sites. Monday January 11, 2010 3:36 Bill Simpson

3:36	Paul B.: For those interested in viewing the gap in IPO performance from US-listed Chinese companies . . http://www.renaissancecapital.com/IPOHome/IPOData/foreignc.aspx?country=China Monday January 11, 2010 3:36 Paul B.

3:36	Bill Simpson: those listed here file with the SEC like all the others. Monday January 11, 2010 3:36 Bill Simpson

3:37	Paul B.: Hong Kong and the US are two of the most transparent markets in the world -- which is why we have seen the most IPO activity here. Bill is correct - anyone can get access to an english HK prospectus . . Monday January 11, 2010 3:37 Paul B.

3:38	Mick Weinstein, SA Editor: Question from Sara Behunek of The Deal: "I wou[...]ld like to know whether Paul Kedrosky thinks there is any danger of another tech bubble starting to build in ‘10" Monday January 11, 2010 3:38 Mick Weinstein, SA Editor

3:38	Paul B.: although beware that we have found many of these documents to approach 1,000 pages :) Monday January 11, 2010 3:38 Paul B.

3:39

Paul Kedrosky: Mick: Danger? We should be so lucky as have another tech bubble starting in 2010. The IPO market,and the early-stage funding market both need something to be enthusiastic about. Look at last year's VC fund-raising data. But, the companies in portfolios can legitimately go public. This is not pets.com. Monday January 11, 2010 3:39 Paul Kedrosky

3:40	Bill Simpson: or snowball.com. That was my 'favorite' in the how in the world can this come public days. Monday January 11, 2010 3:40 Bill Simpson

3:41

Paul B.: Not to jump in for Paul K, but there are too many high quality IPO candidates to create a "tech" IPO bubble in my opinion. Also, the market has shown us that it is still selective with respect to what small cap/tech companies it will get behind. VITC and OMER are two examples . . . Monday January 11, 2010 3:41 Paul B.

3:41	Bill Simpson: I see little danger of a buble anytime soon. It would be nice to just get back to a normalized ipo market. Monday January 11, 2010 3:41 Bill Simpson

3:41	Mick Weinstein, SA Editor: Any thoughts on this Rusal deal in HK? AKA 'The rich man's IPO' as it was closed to individual investors... Monday January 11, 2010 3:41 Mick Weinstein, SA Editor

3:42	Mick Weinstein, SA Editor: HK is apparently hoping this will bring a wave of Russian issues there Monday January 11, 2010 3:42 Mick Weinstein, SA Editor

3:42

Paul Kedrosky: Broadly, and I see this in the questions, investors need to carefully bucket prospective IPO investments: growth tech in U.S.; other growth in u.s.; pe; china ipos; euro ipos; and other. I'm mostly interested in U.S. growth, which is where the dearth has been and where the highest quality of supply is latent. Monday January 11, 2010 3:42 Paul Kedrosky

3:43	Bill Simpson: I tend to focus on US growth as well. We've seen some very good looking growth ipos in 2009 and 2010 should bring even more. Monday January 11, 2010 3:43 Bill Simpson

3:43	Paul B.: Keep in mind that the US IPO market will benefit from a continued flow of Chinese companies . . the US is still the top choice for many Chinese firms because of the status associated with listing on a major US exchange Monday January 11, 2010 3:43 Paul B.

3:44	Mick Weinstein, SA Editor: that status remains in place, Paul? Monday January 11, 2010 3:44 Mick Weinstein, SA Editor

3:45	Paul B.: Our "shadow" backlog of potential US growth/tech IPOs is well in excess of 50 and my guess is there is at least 2-3x that number that are capable of completing IPOs at this point Monday January 11, 2010 3:45 Paul B.

3:46	Paul Kedrosky: Similar to Paul B., my list of prospective quality companies is more 40 now. Fairly remarkable, with some real catalysts in there. Monday January 11, 2010 3:46 Paul Kedrosky

3:46	Paul B.: Yes -- the US is still the most liquid market in the world and companies recognize that it will give them access to the highest quality investor base Monday January 11, 2010 3:46 Paul B.

3:47	Mick Weinstein, SA Editor: A follow up to Abbi's question from earlier - what IPO research do you read (beside *of course* SA, Bill's newsletter and Renaissance Capital)? Monday January 11, 2010 3:47 Mick Weinstein, SA Editor

3:47	Paul Kedrosky: Someone recently asked me what to watch for as a warning sign. As usual, the inevitable BusinessWeek cover: "The Return of the IPO!" Monday January 11, 2010 3:47 Paul Kedrosky

3:47	Paul B.: Not to spend a lot of time on this -- but I find the pickup in biotech filings quite interesting . . any thoughts? Monday January 11, 2010 3:47 Paul B.

3:48	Paul Kedrosky: Paul B.: I worry that the pickup in biotech filings speaks more to problem in the private fund-raising market than to likelihood of higher quality issuers, or to investor appetite for revenue-less, binary lottery companies. Monday January 11, 2010 3:48 Paul Kedrosky

3:48	Bill Simpson: Mick, I sit down with the SEC filings for every deal every year. It is a thrilling job, but someone has to do it! Actually it how I make my trading decisions and would tell anyone interested in ipos to dig through them in that fashion Monday January 11, 2010 3:48 Bill Simpson

3:48	Paul B.: Almost 10 biotech filings in 2H09 . . easily accounting for the largest % of VC-backed filings in that timeframe http://www.renaissancecapital.com/IPOHome/Calendars/Pipe.aspx Monday January 11, 2010 3:48 Paul B.

3:49	Bill Simpson: I tend to avoid the development stage bios as too many things can go wrong on the path to commercialization Monday January 11, 2010 3:49 Bill Simpson

3:49	Bill Simpson: the pick-up thought tells us a bit about the shape of the ipo market improving Monday January 11, 2010 3:49 Bill Simpson

3:49	Paul B.: Yes Paul K. . . which speaks to the point that we have really yet to see the "wave" in new tech IPO filings. We started to see some late in the year -- I think we could see an explosion over the next 3 months Monday January 11, 2010 3:49 Paul B.

3:49	Paul Kedrosky: Showing how skewed things were in 2009, a little more than 70% of IPO market value last year came from two countries, Brazil and China. Monday January 11, 2010 3:49 Paul Kedrosky

3:50	Bill Simpson: there was one huge Brazil deal in there too that skews it a tad. BSBR. Monday January 11, 2010 3:50 Bill Simpson

3:50	Paul Kedrosky: Paul B.: Every valley venture investor I talk is with legal crafting filings. Every single one. There will be a flood. Monday January 11, 2010 3:50 Paul Kedrosky

3:50	Bill Simpson: but yes we saw a lot of Chna deals hits Monday January 11, 2010 3:50 Bill Simpson

3:51	Paul B.: The discrepancy in IPO capital raised really speaks to both the state of those economies -- there are many more large private companies -- in areas like infrasctructure and finance. Also we see privatizations as fueling a lot of IPO acitivity overseas Monday January 11, 2010 3:51 Paul B.

3:51	Mick Weinstein, SA Editor: Scenario: Facebook or LinkedIn floats and it doesn't do well, let's say the whole market tanks then... what happens to the rest of the tech issues? Monday January 11, 2010 3:51 Mick Weinstein, SA Editor

3:52	Paul Kedrosky: I honestly think biotech filings are uncorrelated with anything important. They are like the pilot fish of the IPO market, grabbing holding of moving objects and hoping to get sucked out into better feeding terrain. Monday January 11, 2010 3:52 Paul Kedrosky

3:52	Bill Simpson: The door shuts in that scenario Mick Monday January 11, 2010 3:52 Bill Simpson

3:52	Paul Kedrosky: Mick: That would do it. We need a positive catalyst, so if big names come and fail, we're done for 2010. Monday January 11, 2010 3:52 Paul Kedrosky

3:53	Paul B.: Mick: I will be utterly shocked if that scenario unfolds. . .but if it does, the IPO market is probably the least of everone's worries Monday January 11, 2010 3:53 Paul B.

3:53	Bill Simpson: I don't expect that to happen though. I would expect Facebook to be warmly received. Monday January 11, 2010 3:53 Bill Simpson

3:54	Paul Kedrosky: But the reverse is more interesting: What if LinkedIn, Facebook and Twitter all come, plus Yelp and a host of others, and Nasdaq bubbles in an absurd way. Who is positioned for that? Not me. Monday January 11, 2010 3:54 Paul Kedrosky

3:54	Paul B.: But I think it's worth noting that Facebook or no Facebook, the IPO market for tech/growth IPOs will be better in the months ahead. Everyone asked at the time if Google's IPO would spawn a tech IPO revival, but it didn't Monday January 11, 2010 3:54 Paul B.

3:55	Bill Simpson: Paul, I agree. I would bet most out there are not even aware that these tech/growth ipos recently have done as well as they have. Monday January 11, 2010 3:55 Bill Simpson

3:55	Paul B.: So my stance is that a successful Facebook IPO would be great for the IPO market, but it will not open the floodgates. . . those gates are already set to open for the reasons we have already discussed Monday January 11, 2010 3:55 Paul B.

3:56	Paul B.: Let's also not forgot about cleantech . . . a lot of VC money has been put into this area and many of these companies are capital intensive than the typical tech IPO -- Monday January 11, 2010 3:56 Paul B.

3:57	Paul Kedrosky: Cleantech is up there with early-stage biotech for me: Capital-intensive lottery tickets. Monday January 11, 2010 3:57 Paul Kedrosky

3:57	Paul B.: The A123 deal was impressive given their #'s . . . it will be interesting to see how the market responds to Solyndra -- another cleantech spending tons of cash but with help from the government Monday January 11, 2010 3:57 Paul B.

3:58	Mick Weinstein, SA Editor: What are your thoughts on Symetra, with Berkshire Hathaway backing? http://online.wsj.com/article/SB10001424052748704842604574642231393546674.html Monday January 11, 2010 3:58 Mick Weinstein, SA Editor

3:58	Paul Kedrosky: I'm worried that we could have some big speculative bombs in private market cleantech this year, including one in Texas we all know well. That would keep door shut. Monday January 11, 2010 3:58 Paul Kedrosky

3:58	Bill Simpson: A123 has done very well. I am in Paul K's camp though in that I tend to shy away from those burning cash as quickly as A123. I missed out on a good deal, but the financials are scary there Monday January 11, 2010 3:58 Bill Simpson

3:59

Paul B.: A few months back Bill Gates made some insightful comments at Columbia Business School -- said cleantech will bring us some great technology down the road, but probably won't be the best sector from an investment perspective (in other words, lots of failures) Monday January 11, 2010 3:59 Paul B.

4:00	Paul Kedrosky: Mick: Symmetra is somewhat interesting, a cute above the usual financial riff-raff of REITs and SPACs. Monday January 11, 2010 4:00 Paul Kedrosky

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Paul B.: What A123 showed is that there is demand for early-stage, speculative growth if it can tell the right story . . .also don't underestimate the amount of investment funds that are being mandated to put $ to work in this space -- that may have further contributed to A123's success Monday January 11, 2010 4:00 Paul B.

4:01	Paul Kedrosky: "a cut above", not a "cute" above :-) Monday January 11, 2010 4:01 Paul Kedrosky

4:02	Paul B.: Symetra has received some lukewarm press . . although I believe it is coming to market close to (if not below) book value. So if you believe the worst is behind the insurance industry . . . Monday January 11, 2010 4:02 Paul B.

4:02	Bill Simpson: Symetra - Insurers tend to get valued fairly accurately short term out the chute. I wouldn't expect too much there initially. Deal should work though assuming they do not get carried away on pricing. Monday January 11, 2010 4:02 Bill Simpson

4:02	Mick Weinstein, SA Editor: OK, we're going to wrap up here, thanks so much to the panelists. Monday January 11, 2010 4:02 Mick Weinstein, SA Editor

4:02	Paul Kedrosky: Thanks all. Good chatting. Monday January 11, 2010 4:02 Paul Kedrosky

4:02	Mick Weinstein, SA Editor: Lots of optimism, it'll be interesting to see it play out. Monday January 11, 2010 4:02 Mick Weinstein, SA Editor

4:02	Bill Simpson: Thanks all. Monday January 11, 2010 4:02 Bill Simpson

4:03	Paul B.: Thanks everyone! Looking forward to an exciting year for IPOs! Monday January 11, 2010 4:03 Paul B.

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