2013 IPO / Crowdfunding Market Forecast

2013 Crowdfunding / IPO Market Forecast

As the global economy continues to show signs of improvement, the market for Initial Public Offerings (IPO) is expected to jump by double digits in 2013.

IPOVillage.com and First Line Capital are expecting 15 to 17 percent growth in the number of NASDAQ IPO’s in 2013. The growth is being spurred by the JOBS Act – Jump-Start Our Business Start-Ups – and an improving economy.

We are seeing a steady increase in investors interested in IPOs at IPO Village. Now that investors are bringing cash to the table, businesses are going to find a way to get to the capital and put it to work.

First Line Capital is reporting an increase in interest of companies wanting to go public as well. First Line is in a rare position to see IPOs well before the public is aware of a company issuing stock for the first time. First Line is an investment banking consulting firm which guides companies through the IPO process to raise capital in the public markets. First Line is major force in the direct-to-public IPO marketplace.

First Line could not comment on deal specifics, but the number of deals in discussion is up and rising.

First Line recently partnered with IPO Village to provide support and consulting services to companies which need assistance in setting up their IPO. Because First Line is so intimately involved with the public IPO process, it begins working with companies months ahead of an IPO. Work begins up to a year before the company starts the SEC review process.

With 20 years of experience in helping small to large companies go public, First Line has an extensive network of corporations around the globe who have staged IPO’s. Their reputation is also attracting new companies to the IPO marketplace.

SMALL COMPANIES TO SURGE IN 2013

“The [JOBS] act … allows ‘emerging growth companies,’ with less than $1 billion in annual revenues to submit their documents to the SEC for confidential reviews and wait until 21 days before their IPO roadshow to make a public filing,” Wall Street Journal Senior Editor Emily Chasan reports in her blog.

Clearly, JOBS is going to have a significant and long lasting impact on the future of business and industry in the United States. Here at IPOVillage.com, we are already seeing an uptick in the queries about companies raising money through an IPO. We attribute this directly and indirectly to JOBS.

THE EFFECT OF THE JOBS ACT

The JOBS Act has eliminated many of the barriers for small companies to go public. It’s just that simple.

“The Jumpstart Our Business Startups (JOBS) Act, passed by the U.S. Government in April, provides opportunity for small companies by easing regulations and allowing unaccredited investors to participate in ‘crowdfunding’ to raise capital,” wrote MSN Money reporter Trefis . “Small-to-midcap companies are usually reluctant to go public because they are discouraged by the legal, marketing and accounting costs involved, as well as the requirement to disclose quarterly financial and business information, which poses a competitive threat to their operations. The JOBS Act, however, considerably reduces the regulatory burden on emerging companies and makes it easier for them to go public.”

The idea that crowdfunding is the driving force behind new IPOs is being supported by others. Writing in Forbes, Devin Thorpe lists a number of reasons why crowdfunding is going to seriously take off in 2013.

By taking an IPO through a crowdfunding route, a small company accomplishes several things:

• It minimizes the expense of attorneys who charge hefty fees to guide an IPO.

• It sidesteps institutional investors who buy IPO stock at a discounted rate and turn around and sell it at a profit.

• It avoids the hyperbolic publicity buildup as seen when taking an IPO through underwriters and lets the public participate in pre-IPO pricing.

A BETTER ECONOMY

As the global economy gradually improves and the US market with it, smart business owners are looking at expanding their reach. To do that, they need capital and one of the best ways to do that is to sell stock.

Small business is the backbone of the nation, providing the bulk of jobs and re-investment into the economy. Anything that can help small business compete and perform better simply has to lead to a better economy. In the passage of the JOBS act, Congress recognizes this.

“Because of its critical importance to job creation and economic growth, the small business community is a prized constituency in Washington, D.C.,” wrote John Kinney for Baker-Donelson. “The JOBS Act could give small long term care companies an additional source of start-up funding and expansion at a time of market uncertainty.”

The JOBS act and crowdfunding as offered by IPOVillage and First Line Capital allow small and startup businesses to access capital they would otherwise not be able to reach.

“Crowdfunding enables small or start-up businesses that may not have access to traditional methods of capital financing to raise capital via the Internet and social media, typically from small-dollar investors,” write Nicole Jumper and Joel Buckberg for Baker-Donelson.

PAST IPOS

Because smaller companies are typically not going public with a big splash in the major markets, tracking them will have to wait until the SEC closes the IPO books for 2012.

However, IPO growth in 2012 slowed compared to 2011, according to Ernst and Young. The report “Sharp decline in global IPO deal value and volume” also suggests an upswing in 2013. Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young, said in the release: “Several large IPO deals are expected by end of 2012 and the market continues to be opportunistic and selective. We expect more volume in first half of 2013. Industries to watch include technology, consumer products and industrials sectors.” The whole article may be read here.

The last time IPO rose by any significant extent was in 2010 according to the report “Global IPO Markets” by Forbes.

In 2009, Forbes counted 577 IPOs. In 2010, that number more than doubled to 1,393, an increase of 141 percent. 2011 showed a very slight decline to 1,225 and the numbers for 2012 are still coming in.

Renaissance Capital is tracking US-based IPOs. Through Oct. 26, they report 121 companies went public for the first time.

NASDAQ reported 86 IPOs since the beginning of the year as of Oct. 26. More were in the pipeline. Interestingly the NASDAQ reports also reports the worst IPO performances are dominated by tech and internet stocks. NASDAQ’s report is only for IPOs handled in that exchange.

NOT JUST FOR SMALL COMPANIES

While the JOBS Act is aimed at small and startup companies, taking an IPO through crowdfunding can be done by any size business. Even the Internet giant Twitter can go through crowdfunding to go public.

A letter to the IPO Village Sponsors & Team from IPO Village

Dear friends,

It is a couple of months into this exciting and revolutionary endeavor and its about time we give credit where credit is due. A little back story for those who are just catching up.

IPO Village was conceptualized and launched by a core group of like minded professionals, firms and organizations who experienced, what can only be called, a shared epiphany. Social networking on the Internet has finally advanced to the point where it could possibly birth and sustain a brand new asset class… the Class of the Crowd. As our core group was essentially from the world of investment banking, our ideas and solutions came from a public market perspective. For over two decades we all had been involved in, venture capital, IPOs and listing and sustaining early stage companies on U.S. exchanges. Facilitating capital for public offerings the traditional way has always been expensive and is exceedingly difficult. Always left negotiating with savvy investors whose interests do not necessarily align with the companies that we were representing. But that was the process and so it went…

Until… the crowd began to make their sentiment clear, “WHAT ABOUT US?” Why must companies sell their IPOs through middlemen? Why must we buy the IPO stock in the market only after it has changed hands twice and been marked up over 20%? Why can’t the companies sell their IPO stock directly to us, the “average joe” retail investor? Why can’t we buy IPO stock at the pre-IPO prices that the underwriters pay for it? Why do you need the underwriters anyway?

The crowd has spoken.

So that is what we set out to do. Create a not-for-profit public service site to equity crowdfund early stage IPOs. The site would be free. No underwriters or underwriter fess. No brokers or broker’s commissions. Free. Companies with verifiable registered public offerings would be welcome to host their offerings on IPO Village. We would educate the new investor, teach them how to conduct their own due diligence and provide them with relevant, valuable, interesting and entertaining industry content.

We did it! IPO Village launched in July. We announced the appointment of our “Mayor” 2 weeks later. The next week we announced the company that would be the first ever to crowdfund an IPO on the internet. There is still up to two months until the offering will be approved by the SEC and open for investment and already over $1 million (over half the goal) has been pledged via over 500 investors. It really looks like this offering could sell out shortly after accepting investments.

It is amazing and the prospects are overwhelming. However, the point of this post is to acknowledge those that have made it possible. Once again, IPO Village is not-for-profit. That means that all the time and resources have been contributed by all parties at the bare minimum cost. This is a project with a conscience run by supporters that have committed themselves to succeed and that know how to execute.

- To Daniel Hirsch and Simon Erblich of First Line Capital, who had the vision, contributed capital, leadership and made all the resources of their firm available 24/7.

- To Seth Farbman of VStock Transfer, for providing and assisting to integrate the entire back-end compliance systems, transfer agency services and industry connections.

- To Doron Erblich and team, a veteran renowned tech guru and entrepreneur, for taking upon himself the role of CTO and website marketing initiatives.

- To Howard Orloff one of the visionaries of the crowdfunding revolution and the proprietor of Crowdfunding-Website-Reviews.com, the go to website for industry reviews, who selflessly accepted the position of “Mayor” or Managing Director of IPO Village. Around the clock commitment, bringing an outstanding array of talent, leadership and resources to the table.

- To Jerry Jennings of Emerson Gerrard,for his professional public relations activities and wise guidance.

- To Joy Schoffler and team of Leverage-PR, for her marketing savvy, high-profile rolodex and all around positive, get up & go attitude.

We have surely left out names, and to those we apologize, but we will have the chance to make mention of them in the future as the team continues to grow rapidly.

We would also like to take this opportunity to invite those interested in getting involved in this exciting endeavor, to reach out to us via this blog or by email.

We are building a revolutionary market place that has unlimited growth potential and the ability to branch off into many complimentary directions. We are building it to adapt and last. There are many areas still yet to explore.

Sincerely,
IPO Village

News Flash! Early-Stage Companies CAN Go Public

Since I can remember, there has been this misnomer regarding young emerging growth companies that they had no place in the public markets. The stock market was for IBM, Apple and Home Depot.

Surprise, surprise! This is simply not the case and it has not been so for a very very long time… the regulations have been the same forever.

While it may be cost-prohibitive for many companies (and I say may, bacause it is not the rule and there are also creative solutions), it is definitely possible for a company in almost any stage of business to file a public registration statement with the SEC, have a market maker file their 15c211 with Finra  and get listed on any of the U.S. exchanges.

Of course it is not as easy as all that, but is a lot more of a viable option then it is given credit for in the industry. The reasons are shamefully obvious. If companies were to direct their own public offerings or conduct DPOs as it were, they would by definition, be cutting out the very prestigious, indispensable and handsomely (if not handsome) paid underwriter (in another life, I am that underwriter). Until today this really had no chance to ever surface. The tentacles of social connectivity simply were not yet long enough.

Facebook, Linkedin, Google+, YouTube, the tentacles are getting pretty long. Long enough to entangle the entire globe in a crowdfunding frenzy and make many investment bankers come to a stark realization… there is a new competitor on the horizon…. EVERYONE….the CROWD is coming…

Check out this video to learn how to get it done solo.