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Posted at 04:00 PM ET, 01/03/2012

Late IPO activity not enough to salvage a lackluster 2011

Among venture-backed firms, the American market for initial public offerings grew last quarter, but not enough to make up for an otherwise sluggish 2011.


Russian search firm Yandex raised $1.3 billion in the biggest venture-backed IPO of the year. (MIKE SEGAR - REUTERS)
Eleven companies with at least one American venture capital investor went public in the fourth quarter, up slightly from the previous three months but down 67 percent from the same period a year ago, according to a new report from Thompson Reuters and the National Venture Capital Association. The same goes for the amount of cash raised, as the $2.6 billion quarter marked a nearly five-fold increase over the third quarter but a 34 percent drop from the fourth quarter last year.

Merger and acquisition activity also slipped 34 percent compared with the fourth quarter of last year, completing the dismal picture for venture-backed liquidity events in 2011.

“Despite a flurry of IPO activity at the end of 2011, the venture-backed IPO market still has a considerable way to go on the road to recovery,” NVCA President Mark Heesen said in a statement.

On the year, 51 venture-backed firms debuted on American markets, representing roughly two out of every five initial public offerings (125), according to data from Renaissance Capital. Both figures were similarly down from the previous year, when 61 venture-backed firms and 154 total companies held their initial public offerings.

The one silver lining from 2011 was the amount of cash raised by the select few that managed to break into the markets. Those 52 venture-backed firms raised a total of $9.9 billion in initial public offerings, led by Russian search firm Yandex with $1.3 billion and social gaming firm Zynga with $1 billion. Of those involving venture-backed firms, the average M&A disclosure deal also increased from $145.4 million in 2010 to $150.2 million in 2011, led by Laredo Petroleum’s $1 billion acquisition of Broad Oak Energy.

See the biggest U.S. initial public offerings of 2011.

Looking ahead, the coming year will likely far surpass the previous one with regards to initial public offerings, with online behemoths Facebook and Yelp readying some of the biggest ever debuts by Internet companies. However, according to Heesen, IPO activity levels will hinge on the rate of economic recovery.

“With a full pipeline of companies in registration and pending legislation to ease the IPO path for emerging growth companies, we could see a more robust market in 2012, but only if we can achieve a reasonable degree of global economic stability,” he said. “The bottom line is that we need at least double the offerings that we saw in 2011 to declare the market back on track, and that could take some time.”

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By  |  04:00 PM ET, 01/03/2012

 
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