Stagnant IPO market not likely to turn until second half of 2009, according to DLA Piper study

The DLA Piper study found that over 90% of respondents indicated that they did not expect the market for IPOs to rebound until the second half of 2009 at the earliest. More than 55% said it would be in 2010 or later.

“To some extent, this represents the impact of the continuing pessimism about IPOs which has never fully recovered from the shut down in the market that resulted from the 2000 bubble burst,” said Peter Astiz, Global Co-head of DLA Piper’s Technology Sector Practice. “It also obviously reflects a strong sense of concern regarding how long it will take capital markets to recover from the current crisis.”



Given that there has been much speculation about the causes of the IPO slowdown even before the current crisis, the survey asked technology leaders what they thought was behind the slowdown. Responses to the questions varied widely:

Approximately 22% responded that it is merely a cyclical phenomenon.

24% responded that it reflects structural changes, such as the impact of Sarbanes-Oxley and the restrictions on investment bank analysts.

The greatest number of respondents, 34%, however, stated that it reflects a more general trend towards companies accepting strong private company M&A exists rather than undertaking the risks of an IPO and growing a public company.

“To some extent, there can be a self-fulfilling prophecy in these dynamics. If a high percentage of the companies with the best IPO prospects sell rather than pursue an IPO, it can have the impact of dampening the average performance of the companies that do complete IPOs which, in turn, can impact on how future companies view the IPO opportunity,” said Astiz.

Please let us know what you think about the IPO market and when it is likely to rebound.