A bunch of readers took issue with last week’s post on venture-backed IPOs, and my belief that the death of small company IPOs has been greatly exaggerated. Specifically, there were complaints that I was focusing too much on large issuers like Groupon
, while ignoring the difficulties companies with revenue of under $100 million (some folks put the threshold at $50 million).
For example, here was an email from William B:
Just want to say that I disagree with your assessment of the IPO market.
I don’t think it is just fine when you need $100M revenues to go public. That in turn causes VC’s to push out time horizons for investments, in turn causing VC’s not to invest in many good concepts as they won’t get the needed returns due to the long hold period. While we don’t need an IPO market for companies based on dreams. But there should be a healthy IPO market for companies of say $15M and $100M. The current market structure doesn’t allow for that. You shouldn’t base a market just around the billion dollar winners. VC’s also should have a path to hit doubles and triples rather than just swing for the fences.
Well, this week may put that complaint to the test. Clovis Oncology is set to price a $160 million offering, despite having a whopping $0 in revenue. Also on the docket is Lashou Group, which only reports $16 million in revenue for the first nine months of 2011. And InterMolecular, with $26 million through the first nine months of 2011. And, just to be sure this isn’t a one-week trend, pre-revenue BioAmber today filed for a $160 million offering.
Maybe this week’s low-rev companies don’t price. Or maybe they do so, but only with massive insider support.
But, on the other hand, what if they do price with outsider support. In that case, what say you dissenters?
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