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The initial public offering industry is in a drought, said Bob McCooey, senior vice president of the Nasdaq's New Listings and Capital Markets department. For the first time in 30 years, not a single IPO was backed by venture capitalists during the last quarter, and on top of that, IPO applications fell 49 percent in the last year.
"We haven't seen as difficult an environment in many, many years," McCooey said. (For the full interview, see video below.)
Duncan Niederauer, CEO of the NYSE Euronext [NYX
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], said that while IPO's are suffering due to market volatility caused by the credit crunch and a lack of investor interest, it may not be the only factor.
"To have the first quarter in 30 years with no venture capital-backed IPO's come into market, part of that you could attribute to the market levels in the second quarter which have been difficult," he said. "I'm not sure how you'd explain away the first quarter when we had very little activity and the market actually hanging in there pretty well."
Although Niederauer has been criticized as wanting to lower standards to increase the number of IPO's, he simply wants to make it less costly for small and mid-sized enterprises, which are the "entrepreneurial engine of this country", to go public, he said. It's not about "reducing standards", but "rationalizing standards," he said. (See video to the left.)
But Neither McCooey nor Niederauer doubt that IPO's will make a comeback, they said.
And it may start with tonight, when two will try to price.
On the NYSE, mortgage real estate investment trust Galiot Capital is seeking to raise 16.7 million shares at $15 to $18. Energy Recovery, which makes energy recovery devices for water deslination plants, is seeking to raise 14 million shares at $7 to $9 on the Nasdaq.
"The pipeline isn't empty," Niederauer said. "It's [just] not as full as it used to be."
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