The Year Of The IPO Purge - InformationWeek

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The Year Of The IPO Purge

As the calendar winds down on what has been the Year of theIPO Purge, companies have been pulling their initial public offerings at the rate of one a day in December, and the outlook is bleak for early next year.

Few of the 18 that have scrapped their IPO plans have been in the black, and not all have been tech stocks. Last week's list included Kyphon, an orthopedic medical device manufacturer; NetLibrary, an unprofitable venture that develops technology for publishers; E-Profile, an outsourcer for financial services firms looking to open shop online; Greenfield Online, an Internet market research company; E- business firm Iconixx; and wireless services provider RTS Wireless.

"Even for companies that are profitable, the market is so negative that even some good companies can't go public now," says Michael Sheridan, a partner at Mohr, Davidow Ventures. "It takes a market-leading position. What analysts are looking at is what is the state of the market they're entering: Is it a growth market? First-mover advantage is more important than anything."

Underwriters have been flushing out the IPO bottleneck. Other companies sent off to the capital-markets scrap heap include targeted marketing company Naviant, digital subscriber line providers Flashcom and GoDigital Networks, CarsDirect.com, E-commerce company Moai Technologies, and human-resources outsourcer Trinet Group.

Kevin Harvey, general partner at Benchmark Capital, says companies looking to push through their offerings will have to be profitable, or close to it. "Underwriters serve the market, they don't make it. If the market has demand for IPOs, they will provide IPOs. I don't think the market is going to have a strong demand for IPOs in March. It's going to take longer than that."

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