Hope For The Small IPO Market?

Insights for technology companies June 2011

Q: Current market structure — friend or foe of small businesses?

While the IPO market has shown some life in 2011 — with 71 IPOs as of May 31, 2011 — activity is far below the average of 520 IPOs in the years leading up to the dot-com bubble and not much ahead of the average of 130 IPOs post-bubble starting in 2001. And still in question is the capacity of the U.S. markets to support small public companies and sustain the volume of IPOs needed to drive the U.S. economy. Of this year's 71 IPOs, eight offerings total under $50 million in market capitalization, and shares at 29 companies are trading at or below their offer price.

Sub-$50 million IPOs once comprised more than 80% of all IPOs, but by 2000 — before decimalization and Sarbanes-Oxley — that number had fallen to a mere 20%.