Initial public offerings by high-tech start-ups dropped in 2011 and will stay weak this year, reducing job growth, a leading trade group said.
Only 52 venture-capital-backed start-ups went public in 2011, down from 75 in 2010 and 86 in 2007, the last year before the financial crisis, continuing a decade-long slump since the dot-com bust, according to data released Tuesday by Thomson Reuters and the National Venture Capital Association. Less than half of NVCA members believe the market will pick up this year, despite the expected stock market debut of social-networking leader Facebook, association President Mark Heesen said.
"It's all about stability and confidence, and we don't have stability, and confidence has really waned," Heesen said. "If these companies don't go public, we're delaying growth in the very companies that really mean something to the economy."
Start-ups that have gone public since 2000 have hired about 76 percent of their eventual employees after getting IPO capital, while companies that sell to larger competitors because they can't go public grow more slowly, according to a 2011 study by IHS Global Insight.
Until last summer's debt-ceiling showdown, IPOs were staging a modest recovery from a financial crisis-induced drought, with 41 deals in the first half of 2011. Then a one-two punch of Congress' early-August wrangling and the unraveling of a European debt deal slammed on the brakes, Heesen said. Only 11 start-ups went public in the fourth quarter.
Even once hotly awaited IPOs such as social-gaming company Zynga and daily-deal site Groupon didn't ignite the market. Each stock is now trading below even the lowered IPO prices.
"I'm thrilled to see Facebook go public, but I don't think any company has coattails," Heesen said.
On the plus side, the 202 companies that have filed pre-IPO paperwork are the biggest pipeline of deals since 2000, according to Renaissance Capital. Its figures include established companies not in NVCA's numbers. But their prospects depend on the broader economy, one expert said.
"I don't see anything to suggest this year will be much different than last," said Lise Buyer, an IPO consultant in Silicon Valley. "The macroeconomic environment will still have the greatest impact on short-term IPO performance."
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