Why the IPO “experts” are wrong

Posted on by
Reply

Those who study the history of financial markets learn one thing: When all the “experts” agree, they are wrong.

That’s the case with the naysayers who are looking at 2013 to be an even flatter year for Initial Public Offerings. 2012 was down from 2011 and the experts say the financial condition of the United States and the world have not improved enough to make the market pick up.

“Gau, Ritter, and Zhu [authors of a paper “Where Have All the IPOs Gone"] expect the JOBS Act and other regulatory stimulus efforts to have an inconsequential impact on IPO activity and think we are unlikely to see the number of deals return to the levels seen in decades past,” states a report in SeekingAlpha.com , an investment website.

What these men almost overlook is the Jumpstart Our Business Startups act. JOBS promises to cut through the red tape that hinders small businesses from going public to raise needed capital. The three authors do acknowledge the JOBS act, but they believe it will have no effect on the IPO market. These men are not accustomed to dealing with smaller businesses. Since their focus is on giant corporations, they are not able to see the small companies.JOBS was specifically created for the small businessman who flies under the radar of the world’s financial giants. The innovations they create, which previously had to be shopped to existing giant tech companies, can now be developed and marketed by the creator.ACCESS MATTERSWhile the US led the IPO market by a large margin in 2012, the decline will hold, Hazem Ben-Gacem told the Wall Street Journal in the article “U.S. Has Biggest Slice of Slower Deal Market.” Mr. Ben-Gacem is the head of European corporate investment for Investcorp, an investment firm with offices in London, New York and Bahrain. “The one advantage with slow IPO markets is that, typically, only the best companies come forward and give it a try. A successful IPO in current markets requires some good timing and a compelling story for investors.”

Again, as a financial firm, Investcorp has little experience in dealing with companies that employ 20, 10 or fewer people, the very kind of company JOBS targets.

Such small companies do not have the existing financial resources to “ante up” to the big tables for an IPO. They simply cannot afford to spend tens of thousands to possibly $1 million on lawyers. They are also not willing to let giant industrial investors buy the stock at a discount and turn around to sell it to the public at a substantial profit.

While good timing and a compelling story are very important, just getting access to investors is more important. You can have the best idea in the world and the timing be perfect, but if you can’t get capital, it’s not going to matter.

TECH TALK

The WSJ’s MarketWatch also talked to Deutsche Bank officials which said tech companies are going to be particularly slow. Chris Dieterich reports “Several factors have cast a pall over technology IPOs, Mr. [Ted] Tobiason said. For one, investors remain soured from a disappointing third-quarter earnings season, even as tech giants gear up to report fourth-quarter numbers in the weeks ahead. Weak earnings in the tech sector could act as a deterrent in the IPO market because potential issuers would likely get lower valuations. Tobiason is managing director of equity capital markets at Deutsche Bank.

The key words here are “tech giants.” Again the small picture is lost as the experts stand back to admire the expansive vista created by the giants. In the rush to talk about tech stocks, everyone seems to forget that tech advances come from one person or a small group of people, even from within a giant company.

Look at Apple, Google and other tech giants on the block. They all started small. Steve Jobs and Steve Wozniak almost didn’t manage to start Apple because of the problems at the time in attracting capital investors. Today, with the JOBS act and the IPO marketplace the way it is, they’d find raising money a much easier task.

Just as a single candle may not shed much light, a thousand, a million candles can light an opera house. Small business IPOs are going to be those million candles lighting up the financial world in 2013.
We firmly expect the upcoming IPOs of 2013 to turn the negative trend that has been impacting the small-cap IPO market for the past few years. The market needs to work to understand the JOBS Act and the positive impact it can have on the US equity market system.
Additional Crowdfunding Information

Upcoming DPO(s) will help bring about Equity Crowdfunding Rules

Posted on by
1

After reflecting on the event at Crowdfund Texas, I have come to the firm belief that the upcoming IPO(s) from IPO Village will encourage movement on the rules that will ultimately  govern equity crowdfunding. Equity Crowdfunding will bring about a new asset class that will have its own rules and regs from both the SEC and FINRA. The Direct to Public Offerings (DPO) being presented on IPO Village are a natural intermediate step to this new asset class. Unlike the traditional definition of equity crowdfunding, the offerings shown on IPO Village are not private equity offerings. They are in fact companies that are going to be publicly traded and include all the benefits that come with that status. Two of the benefits from the perspective of the investing crowd are the facts that these companies will have filed S-1′s that have been approved by the SEC (standard investor protection as exists under 1933 securities law) and an established secondary market (The issues stock will trade on the OTC market).
This actually resolves two of the biggest concerns surrounding equity crowdfunding, the first of course is the disclosure (investor protection) being offered by companies seeking to acquire capital through equity crowdfunding, the second being, once you own a piece of a privately held company how do you liquidate the holding. There will ultimately be a secondary market for equity crowdfunded offerings, the question is when. Under the JOBS act you are required by law to hold that investment for a minimum of one year, this is not the case with a public offering.
The updated and fully functional version of IPO Village will be available over the next few week. This will include an investor education section and many features to ensure the crowd has access to the same level of detailed information as the “professional” IPO investor. All SEC filings and disclosures will be made available to the crowd in one easy to find location, as well as business plans, video’s and financials for the companies being presented for DPO (Direct To Public Offerings). Unlike any IPO we will have seen you will have an open forum to discuss the offering with other members of the crowd and have the opportunity to “Ask the CEO”. These questions and answers will be made available to the crowd. You can’t get that kind of transparency on any other platform.
Once the power and intelligence of the crowd is proven through the success of IPO Village, it will speed the change to private equity offerings via equity crowdfunding.
The updated site will be available at www.IPOvillage.com , Signup to take your place in line for the democratization of the IPO process. Signing up is not a commitment to invest but it is the only way you will have the opportunity to decide.

All Eyes on the Crowdfund Texas Conference

Posted on by
1

The coming Crowdfund Texas conference (http://www.crowdfundtx.com/) in Austin, on January 8th, 2013 is another perfect example of how crowdfunding is rapidly becoCrowdfund Texas Conferenceming a mainstream investment strategy. Attracting some of the biggest names and companies in both old and new finance.

When the organizers asked me to attend and be interviewed for the documentary being filmed at the conference (Crowd of Angels), I knew I was very interested in attending. This is just the kind of boost crowdfunding needs. I couldn’t be more excited to be representing IPO Village at this prestigious event.

When I looked over the list of featured speakers, I knew I had to attend. While I have not met all the speakers, I am familiar with most of them. All have a solid foundation in investing and all are strong supporters of crowdfunding. These people would be at home in any big Wall Street financial giant, but they have chosen pursue direct-to-the-public investing.

A few of the speakers to pay close attention to are:

Rodney Sampson co-founded Multicast Media Networks (Streamingfaith.com) in 2000, Intellect in 2002, Intellect Inspire in 2006 and Legacy Opportunity Fund in 2007. Currently, Sampson is building Opportunity Fund, a US based “super” growth fund and crowd funding platform designed to provide underserved and underrepresented communities access to investment opportunities traditionally reserved for accredited and institutional investors. He also serves on the boards of a publishing company, a merchant investment bank, Community Development Corporation (CDC) and the Crowdfunding Professional Association.

One of four ladies on the speaker roster, Kim Wales is the founder of Wales Capital and a board member and founding member at Crowdfund Intermediary Regulatory Advocates and a governing board member and founding member at Crowdfunding Professionals Association. Kim’s work in these voluntary regulation agencies is vital. While crowdfunding rules under the Jumpstart Our Business Startups (JOBS) act will eventually come down from the SEC, voluntary regulation of the industry will keep federal hands off this investment.

Brian Meece is the founder of crowdfunding website RocketHub.com . He is going to bring direct experience in overseeing crowdfunding efforts to this conference. Businesses that enable crowdfunding investors to step up with their money is integral to the crowdfunding industry. I look forward to sharing notes with Meece.

Scott Purcell is a heavyweight for this conference. According to Wikipedia, “Purcell was the founder of Epoch Networks, which was the fourth commercial internet backbone ever, raised in excess of $100 million in venture capital and was at one time was the largest privately held internet service provider in the United States. He also served as a Board Member of the internet industry associations trade group, CIX the Commercial Internet eXchange. In the formative years of the industry he was appointed by CIX to serve as the government liaison, working with the Clinton administration and the FCC on a variety of internet and telecom related legislation and issues.” He’s also started a number of other companies and brings massive experience of raising money for various projects to the table.

There are a number of other speakers of equal importance to the world of crowdfunding at the conference, but space limits how many I can discuss here. I can certainly say this crowdfunding conference will absolutely be a huge boost to this industry. The media coverage and the later release of the documentary will bring more people into this exciting investment world.

Although I will be not presenting at the conference, please feel free to introduce yourself and bring any questions you may have about IPOvillage.com and Crowdfunding NASDAQ IPO’s.

If you are serious about crowdfunding, this conference will have something for you.

Look Forward to Seeing You There!!
Howard Orloff
Managing Director / Mayor
IPO Village