IPOs heat up in Q2, but red flags appear

... as IPO candidates withdraw and M&A activity looks to be stalling

The market hasn't exactly seen the 50 to 100 tech IPOs anticipated at the start of the year. And, despite some encouraging signs of liquidity events for venture capitalists, IPO withdrawals and a slowdown in M&A volume in the second quarter raise some concerns the recovery for liquidity events is vulnerable.

Fifteen venture-backed IPOs went public in the second quarter, raising $899 million, up from three IPOs that raised $232 million in the same period a year ago, according to the latest report from Dow Jones VentureSource.

The largest venture-backed IPO came from Tesla Motors, the maker of fuel-efficient electronic cars, which made its debut on Wednesday, at a $17 IPO price. Shares traded at $21 in recent activity. [Elon Musk, Tesla's founder and CEO, will be a guest on VatorNews this summer.]

Despite a seemingly healthy market, there are signs of a potential slowdown.

“Venture-backed IPOs hitting double-digits for the first time since 2007 is promising, but a spate of recent withdrawals by IPO candidates signals some instability in the market,” said Jessica Canning, global research director for Dow Jones VentureSource. “Three companies withdrew their IPO registration in the second quarter, most citing unfavorable market conditions, leaving 41 companies in the pipeline.”

As for mergers and acquisitions of venture-backed companies, activity was up 12% to 182 deals in the first six months of this year. But the acceleration masks the slowdown that occured in the second quarter, when activity slowed down by four percent from the second quarter of 2009.

"The European debt crisis is a likely catalyst for many of the IPO withdrawals and underwhelming public-market debuts posted this quarter as well as the drop in M&A activity as corporations hesitate to close new deals," said Scott Austin, editor of Dow Jones VentureWire.

Even so, the media amount paid was $70 million, about five times more than the $14.5 million paid during the same quarter last year.

Here's the largest deals, as listed by VentureSource.