Crowdfunding could fill void left by dip in IPO market: study

The number of tech firm IPOs fell last year as political and economic instability continued to rock public markets around the world, new Ernst & Young data show.

There were 149 tech IPOs in 2011, down from 180 in 2010, according toErnst & Young’s report “Global IPO Trends 2012.” (There were just59 technology IPOs in 2009 but that dip was due to the global bankingcrisis that touched off economic instability worldwide.)

Tech IPOs raised $14.7 billion last year, also a drop from the $20.7billion raised in 2010.

Canada was home to 5.2 per cent of all IPOs in the world last year –for all sectors, not just tech – putting us in sixth place after topranked China (it had 31.7 per cent of all IPOs), Poland (11.2 per centof all deals) and the U.S. (8.8 per cent of all IPOs).

“(Mainland) China remains the global IPO powerhouse,” the study noted,adding that Hong Kong’s stock market will likely give mainland China’sa run for its money as more foreign firms look to go public in HongKong in the next few years.

Canada lagged behind when the value of our IPOs was measured. We camein tenth spot with $2.4 billion raised through IPOs among allindustries. That means our IPOs were collectively worth just 1.4 percent of thetotal value of all IPOs in the world.

The hottest IPO trends right now? China, IPO alternatives and socialmedia. China and Hong Kong will continue to see more IPOs as notedabove. And companies searching for other ways to raise equity will lookto crowdfunding and other new sourcesof such financing.

 “Newer forms of equity financing, such as crowdfundingportals enabling direct access to investors … became more appealing toIPO companies. With the market conditions likely to remain challengingthrough 2012, companies need to take a broad view of their fundingoptions,” the report states.

And lastly, we’ll see more social media and Internet firms go publicsoon in a very strategic way. How so? Many will float only a smallpercentage of their total shares so the stocks will be worth more, andcompanies in other sectors will probably pick up on the trend, Ernst& Young predicts.

“We expect to see more candidates from other business areas copyingthat IPO strategy in 2012,” the study says.

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Jim Love, Chief Content Officer, IT World Canada

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