Months after Facebook’s disappointing debut, companies are still skittish about putting themselves through the same process. Despite some recent successes for tech IPOs, another big company is now announcing that it is holding off going public until things calm down a bit.
At the Evernote Trunk Conference, Chief Executive Officer Phil Libin cited Facebook’s catastrophic IPO, and subsequent fall, as one the main reasons behind this decision.
Seeing Facebook fall to half its IPO, “reinforces the approach of IPO slowly,” Libin said. “The best time to IPO is when the market is kind of boring.”
In May, Mountain View, Ca-based Evernote, whose slogan is Remember Everything, raised a $70 million Series D round of funding at a $1 billion valuation. The round brought Evernote's funding to a total of $165.5 million, after it raised $50 from Sequoia Capital and Morgenthaler Ventures in July 2011. Before that, it raised $20 million in October 2010, also from Sequoia Capital.
Evernote has 38 million million members, more than triple the number it has last year, though only roughly 1.5 million are paying subscribers.
Not the first to delay
Before Facebook was going to go public, it was assumed numerous companies would ride its coattails. Then Facebook’s stock opened weaker than expected, finishing only 37 cents above IPO price and then it tanked, hitting 24% below its IPO price in a week.
This, of course, scared off many companies who had planned to go public, including Kayak, Tria Beauty, Corsair Components, CyOptics, Graff Diamonds, Formula One, and Vkontakte, the largest social media website in Russia.
In July, Mobile video provider MobiTV, which filed for a $75 million initial public offering in August 2011, requested that its IPO be withdrawn as well, citing “unfavorable market conditions.”
The second quarter of 2012 saw only 11 venture-backed companies in the United States go public, down from 20 the previous quarter, according a report from Dow Jones VentureSource. Those 11 companies raised $7.7 billion through its collective IPOs, an increase over the $1.7 billion raised by 14 IPOs in the first quarter of 2011.
So while companies might be raising more for their IPOs, there are less companies willing to take the risk of going public, and that is not great news for the IPO market.
“We are not seeing smaller companies going public anymore. Tech is producing big companies that hit the IPO with a lot of cash and aren’t poised for multiple growth like back in the days of Amazon and Google’s IPO. There were 200 medium-sized IPOs a year more than 10 years ago, last year there were 11 huge companies instead," she said.
Some recent IPO success stories
The news is not all bad, and some companies that have recently taken the risk of going public have been rewarded for it.
Kayak and Palo Alto Networks went public at the end of July. Kayak closed at $33.18 a share, 27% more than its starting price of $26, giving the company a valuation of over $1 billion.
Palo Alto Networks also saw shares go up 26% in its first day of trading, closing at $53, up from its $42 offering price.
There are even some who think that Facebook's bottoming out is a good thing for the market.
In July, Valerie Foo, senior research manager at Dow Jones VentureSource, told VatorNews that she thinks that the Facebook IPO might have been a good thing, as it may have set expectations back to the normal.
“Entrepreneurs and corporate buyers were not seeing eye-to-eye on price but Facebook’s IPO delivered a dose of reality. The uptick in M&A may be a result of entrepreneurs resetting their valuations so that they’re now in line with what acquirers are willing to pay,” Foo said.
Evernote could not be reached for comment
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