Is the Dot Com IPO Dead?

On August 19, 2007, Google will celebrate its third anniversary since debuting on Nasdaq. Google has enjoyed an exceptional market dominance considering the stock is up more than 500 percent from its asking price. However, despite the success of Google, it has not ignited another round of significant dot com offerings.

Most of the more successful private Internet companies have chosen to either stay private while raising money from venture capitalists or completely sell out to well established online behemoths like Yahoo! and Google or even sell out to more traditional giants like Viacom, News Corp. or Time Warner

Many analyst question whether the IPO floodgates will ever open again. Companies like Bebo, Facebook, Brightcove and Joost continue to attract enormous buzz, however the talk seems to be focused around who might buy these companies and not whether they will go public. Looking at the latest acquisitions of Photobucket and Youtube give ideal example of companies sthat were good IPO candidates however sold to larger conglomerates, YouTube to Google and Photobucket to NewsCorp.

It should be noted that LinkedIn has stated through its CEO that it hopes to go public within the next your or two, however this thought and mentality is often the exception in the dot com age of today.

Problems of Going Public

Many private companies have stated that it is far more trouble that what is worth to go public. Much of this is do to the Sarbanes-Oxley Act passed on July 30, 2002 in response to the WorldCom and Enron corporate scandals.

Over the last five years under SarbOx, numerous private companies have seen Wall Street less likely to tolerate pre revenue, concept companies. Also the costs of going public are exorbitantly high especially with all of the new compliance laws governing accounting and corporate governance.

Perhaps the most compelling reason is that it is too costly for private companies to serve as standalone public companies, therefore leaving two options: 1: Sell out to a larger entity or 2: stay private and try to keep growing. Also, because there are not many private companies with annual sales in the hundred million dollar range, there will likely not be a wave of dot com IPOs.

Even Venture Capital company Sequoia Capital which ahs invested in two of the biggest dot com IPO successes ever, Google an Yahoo, will state how difficult it is to go public. The Internet however is a vast resource with enormous possibility and potential. Is the dot com IPO dead, I say no...but the opportunities are a lot smaller than the late 1990's.

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