Posted on: Sunday, December 14, 2003

Next tech IPO boom won't be like last one

By Kevin Maney and Matt Krantz
USA Today

Michael Chasen, CEO of education technology company Blackboard, has received calls from more than a dozen investment bankers who say the market for tech IPOs is back.

For three years, initial public offerings of stock have been all but dead. Now, the market is reopening with a cautious few. Behind the scenes, investment bankers, venture capitalists and CEOs are revving the machinery that will likely produce more in 2004. Blackboard, which has 500 employees and expects $90 million in revenue this year, may be among them.

Momentum for tech IPOs seems to be building. Fifteen began trading in November, the busiest month in two years, says IPO tracker Renaissance Capital. If all goes as planned, December will be the busiest month for IPOs since the bull market's dying days. Speculation is high that search-engine star Google might do a huge IPO next year, and most tech IPOs of late have exceeded investors' rock-bottom expectations.

An IPO rebirth would be good news for the economy. Tech IPOs are famous for providing windfalls for the lucky few who buy the stocks at the offering price, but they do more: IPOs are a source of money for young companies that want to grow and create jobs. Those companies buy computers, software and other technology. IPOs can be the beginning of a virtuous economic cycle.

But don't look for anything like the IPO craze of the late 1990s. Everyone's learned their lesson — or so they say. Tech IPO candidates need more than a big idea. Investors are demanding Old Economy profit and growth.

"Investors are still really burned," says Linda Killian, portfolio manager at Renaissance Capital. "The underwriters are going to be a lot more careful about what they put forth."