New IPOs seen as less risky than dot-com's of the past
Some see risks in today's sky-high market valuations, but nothing like 2000
Not many chief financial officers know what it is like to see their companies double in value in one day. Peter Bardwick has seen it twice.
Bardwick was CFO of online financial news site MarketWatch when it started trading on January 15, 1999, at US$17 per share. By day's end it hit US$97.50 for a market value exceeding US$1 billion. Fourteen years later, on September 20, 2013, Bardwick, 55, was CFO of digital-advertising firm Rocket Fuel when it rose as much as 116 per cent on its first day of trading.
Still, some investors, bankers and venture capitalists say the old refrain that "this time is different" is actually true in 2014, because companies going public these days are older, larger and are offering shares at a more reasonable valuation.
Offerings at the height of the dotcom bubble in 2000 were sold at a median price-to-sales ratio of almost six times last year's level, according to data compiled by Jay Ritter, a finance professor at the University of Florida. The companies that debuted last year were twice as old on average and posted first-day gains that were less than a third of those in 2000, the data show.
"Investors have become more discriminating and more focused on the individual businesses," Bardwick said. "In the '90s, everything was just going up, and when that stopped, it happened in a really bad way."
Last year, 208 companies went public, raising more than US$56 billion in the US, the most since 2007, data compiled shows. Companies seeking more than US$100 million in their US offerings surged an average of 21 per cent on their first day of trading, the biggest annual increase since 2000.