May 9 2009
by Todd Hixon

Liquidity Panel: TLH notes from NVCA annual meeting

Controversial suggestion:  extend lock-ups.  Data suggests that VC selling is a major drag on price during first two years (small cap IPO performance historically is pretty flat in first year, much better in second year).  Newhall from NEA:  average hold post IPO used to be 3 years, before the bubble.

Few buyers for newly minted IPO stocks, but many buyers/holders for seasoned small cap stocks

Various suggestions for how to enhance the IPO process, but the nub of it is:  IPO companies need to be leaders in important growing markets, executing well, profitable.  These companies can still get public, viz Rosetta Stone.  And VCs should not expect to get out in 12 months:  puts too much pressure on the market.  Good companies will continue to appreciate post IPO; VCs should be willing to hold.

And, a big push for support for the boutique banks:  recreate the 4 horsemen.  Deninger of Jeffries makes the case that big banks were not supporting small cap IPOs, even before the financial crisis, and even less so now, as they struggle to restructure.  He showed a bunch of examples of great companies in the past that went public in small deals managed by small banks, eg, Intel’s IPO raised about $25m (inflation adjusted) and was managed by Unterberg Tobin.  The “big banks” got thoroughly bashed:  oriented to big volume of trading, in the pocket of big hedge funds.  [But maybe they will come back, now that hedge funds are dead.]

CEOs are resisting IPOs because they dread the time drain from public process.

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