The pipeline of initial public offerings for 2010 looks promising as private equity firms look to cash in on their investments after coming back to the nearly defunct market in the fall.
Online networking companies may take center stage. So far, the company generating the most buzz hasn't even filed for an IPO: social networking site Facebook, which has many betting its creation of a dual-class stock structure in November is a precursor to going public.
IPO market trackers say other popular online networking companies could soon offer shares to the public. Micro-blogging site Twitter and business networking site LinkedIn will likely follow if Facebook is well received. Restaurant review site Yelp and Internet telephone service Skype, which was sold by eBay to a group of private investors in November, could also join the line.
"Once Facebook makes that move, it will literally be pandemonium," said Scott Sweet, senior managing partner at IPO research firm IPO Boutique. "It will clear the way for everyone else."
As recently as six months ago, there was little excitement in the IPO market after it dried up as the economy worsened. But a flurry of debuts came in the second half of 2009 as confidence in stock markets grew.
In the last year, companies raised about $100 billion globally, and $22 billion in the U.S., through initial public offerings of common stock. The amount raised in the U.S. is about equal to the 2008 total, but that year, the majority of the money came from the $18 billion offering of credit card processor Visa. Both years combined still don't add up to the $59.7 billion collected in 2007.
In addition to the activity expected in the online networking universe, analysts predict that next year will bring a surge in filings as the economy strengthens and private equity firms invested in various companies continue to look for a profitable exit from their investments through an IPO or sale. There are already 95 companies in the IPO pipeline so far, compared with 63 public offerings this year. That's still less than a quarter of the 272 that went public in 2007.
"There's quite an appetite right now for profitable companies, and there are enough coming up that are interesting and have positive cash flow and top-line revenue growth," said Francis Gaskins of IPOdesktop.com. "The window is wide open for what I expect is a backlog of private equity deals that want to get out."
Technology companies planning IPOs are getting the most attention, including Calix Networks, which provides communications systems and software; semiconductor company Telegent Systems; Newegg.com, an online-only retailer that sells computer hardware, software and consumer electronics; and online marketing company QuinStreet.
"There are many well-founded, impressive names out there," Sweet said. "Especially considering how active the past few months have been with the best performances coming from technology companies, I do believe venture capital firms will make a grand entrance back to the market on their credibility."
Also driving the IPO market are deals from Asia, which is enjoying stronger economy and a resurgence in investment. Companies there have clean balance sheets and earnings that are stronger than many debt-heavy U.S. firms. Offerings on exchanges in Hong Kong and mainland China have raised about twice as much as U.S. IPOs in 2009.
In the U.S., the top three performers in 2009 were out of China: water-treatment equipment maker Duoyuan Global Water , online gaming company Changyou.com and Lihua International , which makes magnet wire and fine copper for use in electronics. All have at least doubled from their offering price.
Specialty chemicals maker Chemspec International and clinical stage biotechnology company Omeros earned the dubious distinction of biggest losers among 2009 IPOs, each having fallen about 27 percent from their offering price. Chemspec, which went public in June, lowered its fiscal 2009 outlook due to low global demand. Omeros fell as it received no Food and Drug Administration approvals.
Among the biggest disappointments of 2009 was Rosetta Stone , which debuted in April rising nearly 40 percent on its first trading day. The seller of language learning software canceled a secondary public stock offering in August, and in November said its U.S. consumer business was showing signs of weakness. The stock is down about 4 percent from its offering price.
How well a company did this year seemed to mostly depend on timing and profitability, Gaskins said. Looking forward, there aren't any oil and gas companies in a position to list, he said, though there may be a few spin-offs of those that have already gone public. Meanwhile, the solar sector isn't expected to shine in the IPO market next year as supply exceeds demand.