Look, 2009 was a "flush" year. Market rallies were constrained by the low baseline set at the end of 2008, unemployment was high and caution defined nearly every corporate decision. The travel market sucked. The art market sucked. The financial industry labored on with the support of taxpayer money while 140 banks were forced to call it quits. So, we turn to the new year, as yet undefined, for excitement of the type we want ... and it seems likely to deliver. As Nero played from the rooftops, the social media industry inched forward to the climax we hope to see this year -- the initial public offering.
The action hasn't really begun, and the signals emitted are open to various interpretations. Nonetheless, Facebook's new dual-class stock structure is hard to miss, as it would protect the influence of early entrants to the company -- either as investors or options-compensated employees in the event that the 350 million-strong social networking site brings ownership opportunities to the public.
Reid Hoffman, co-founder and executive chairman of business networking site LinkedIn, has revealed that an IPO is his planned exit strategy, which would also work to the advantage of backers that include Goldman Sachs (GS) and McGraw Hill (MHP). He was coy as to the timing, indicating that it wouldn't be "anytime soon," but spectators suspect that a Facebook IPO would provide a great test case for Hoffman and his team.
And, Twitter is sure to be waiting in the wings.
With Twitter's nearly 60 million registered users, 2009 was an incredible growth year for the microblogging service. It even pulled in $25 million in revenue from real-time search deals with Microsoft (MSFT) and Google (GOOG), though an end-run by Yahoo! (YHOO) through Twitter's APIs may compromise that business model going forward. Regardless of the viability of that particular revenue stream, though, Twitter has demonstrated that it is capable of finding revenue. Changes to its terms of service back in September, along with an array of new features, suggest that ads are likely to appear on Twitter.com sometime soon, which means the till will start to jingle. There's also the possibility that all the talk of premium accounts for business users will actually become a reality.
Aside from this social media troika, others could join the party. Yelp, which was rumored to be on the brink of a deal with Google, is said to be on the prowl for an IPO. Skype, which eBay (EBAY) unloaded to private investors in November, may also be looking for public glory in 2010. Outside the social media space, a wave of IPOs is expected, as well, since two years of financial misery have prevented private equity firms, venture capitalists and other institutional investors from being able to reach the exits.
All the talk of IPOs marks a distinct change in sentiment. Last year was comparable with 2008, but only because 2008 was so miserable. In 2009, IPOs accounted for only $100 million in capital raising worldwide, with $22 billion of that coming in the U.S. The second half of the year is when a considerable amount of the activity occurred, thanks to the stabilization of financial markets, which brought with it an up-tick in investor and issuer confidence. In 2008, a comparable amount was raised in the U.S., though Visa's (V) $18 billion IPO accounted for most of it. The year before, $59.7 billion came to market.
The silver lining in the 2009 IPO market came from China, thanks to Duoyuan Global Water (DGW), a water treatment equipment manufacturer; Changyou.com (CYOU), which deals in online gaming; and Lihua International (LIWA), a manufacturer of magnet wire and fine copper for use in electronics products. Meanwhile, there were plenty of disappointments, including Rosetta Stone (RST), which surged 40% on opening day, only to wind up 4% off from its offering price.
Already, 95 companies are poised to go public in 2010, compared to only 63 for all of 2009. Of course, we still have a long way to go to match 2007, 272 IPOs, but we have the whole year in front of us. Even if we don't match the heights of 2007, may we at least put the dismay of 2009 in the rear-view mirror and see a few transactions that create wealth, make investors happy and lay a foundation for robust growth without the aid of smoke and mirrors.