A Month Later, Fallout from Facebook IPO Persists
'Big backlog' of IPO candidates
Meanwhile, Francis Gaskins of IPOdesktop.com says jitters in the IPO market are only temporary. There's a "big backlog" of companies waiting to go public during the summer, and many have the fundamental strength to still attract investors, he adds.
Much of the weakness in the IPO market is due to macro issues, such as the fragile European economy, uncertainty about the outcome of the upcoming U.S. presidential election and a U.S. stock market that has been shaky since May, he says. The Standard & Poor's 500, a measure of large U.S. stocks, teetered dangerously near a 10% correction in early June. If the stock market regains its footing, companies with the best fundamentals can test the IPO market again, says Peterson of S&P Capital IQ.
Companies and their underwriters will just need to lower their expectations for the types of valuations they get, after the nosebleed valuation of Facebook was so soundly rejected, Gaskins says.
Future IPO investors could actually benefit from the damage Facebook's deal inflicted on confidence. With fewer investors clamoring for shares, the investors willing to buy can demand better prices.
"If the (stock market) indexes are stable, we should have quite a few more IPOs when bankers realize they can't overprice them," Gaskins says.
Swartz reported from San Francisco, Krantz from Los Angeles.