In each of the years 1991 through and including 1997, there were more than 150 small IPOs (those that raised less than $25 million), and three years with more than 300 small IPOs. In each of the years 2000 to 2008, there were never more than 25 small IPOs. What happened to the IPO market? Just last month, Grant Thornton released a report titled Why are IPOs in the ICU?, authored by David Weild and Edward Kim. In it, the authors discuss what they believe are some of the main causes of the drastic reduction in the IPO market since the burst of the investment bubble in 2000-2001. They also conclude that, “The market for underwritten IPOs, given its current structure, is closed to most (80 percent) of the companies that need it."
The Weild/Kim report reviews the history of the IPO market, the reasons for the current IPO crisis, and their “ideas for a new, opt-in stock market capable of reinvigorating the U.S. IPO market.” Without the investment in new and developing companies, there is little financing available to develop new and risky ideas – like the $8 million IPO for Intel back in 1971. Will the U.S. lose its competitive advantage? Weild/Kim answer this question and more. To read their full report, click here. You can also learn more about specific IPOs and how to use pre-IPO trades to develop a lack of marketability discount, by clicking on the “Read Articles” link at the Valuation Advisor’s Lack of Marketability Discount Study™ introduction page.
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