Markets
Tim Keating

Keating Debunks the Myth of the IPO Window

By |

When investment bankers tell executives of emerging growth companies that the time is not right to go public because the IPO “window” is “closed,” they are saying more about their appetite and capacity to do the deal than they are about market conditions. That’s the conclusion drawn in a recent white paper released by Keating Investments’ president Tim Keating that analyzed IPO closing dates over the past 12 ½ years and found that IPOs are regularly closed during 41 out of 52 weeks of the year, or 79% of the time. The paper, “IPO Window: Open 79% of the Time,” is the latest in a series of essays Keating has penned in recent months challenging the conventional wisdom of the emerging growth capital markets, ranging from the lack of equity research for newly public companies to the supposed value a bulge-bracket investment bank brings to an initial offering. Keating analyzed 1,626 IPOs over 652 weeks from January 1, 2001 to June 30. In the average year at least one IPO was closed in 41 out of the 52 possible weeks.

Markets

Growth Equity Gets Its Own Sector – and Performs Better

By |

Venture capital and private equity research group Cambridge Associates has declared growth equity as a distinct asset class, with distinct differences in investment strategy, asset quality and return profile warranting its recognition alongside the two other long-established alternative investment classes. In its most recent market commentary the research firm argues that the growth equity market is distinguished from the venture and private equity markets not only by its investment style and targets, but by its returns. The firm’s analysis of 260 U.S. growth equity investments made between 1992 and 2008 shows growth equity investments besting venture returns in three, five and ten year holding periods, and equaling or exceeding private equity returns after three and five year holds. “It outperformed venture capital over the crucial 10-year window by nearly six points,” the firm notes. Growth equity investments likewise outperformed the Russell 3000 in all but one year of the 17-year research period.

Deals
wine.com

VC Firm Gives Up on Wine.com

By |

New York-based venture capital firm Baker Capital is dumping its failed investment in struggling online national wine retailer Wine.com. Credit Suisse was hired as the exclusive banker to sell the company but first-look buyers have failed to show any interest.  Despite $70 million of annual revenue the online wine business, beset by high marketing and shipping costs and burdened by a Byzantine web of state distribution laws, remains unprofitable after decade, so bankers are left with little more than a nifty domain name to sell. A decade ago Silicon Valley entrepreneur Chris Kitze scooped up the wine.com URL and customer list from Sand Hill Capital after the venture capitalist forced the previous founders into bankruptcy. Kitze paid only $3.3 million.

Views

SEC Clears a Path for a Viable Equity Capital Marketplace with Second No-Action Letter on Angel Crowdfunding

By |

When the SEC followed up its March 29 “No-Action” letter to an online angel investment platform with a second letter a day later addressing the same issue to a different online angel funding startup, it did something that no-action letters aren’t supposed to do: it made policy. And by successively offering to stand-down from enforcement of the onerous broker-dealer rules governing most equity offerings, it cleared a path, albeit rock-strewn and circuitous, toward a viable crowdsourced equity market – something that the agency has been unable or unwilling to do within the mandates of the JOBS Act. The message delivered by the agency in those letters to the FundersClub and AngelList online angel funding websites was that small but not insignificant amounts of investment capital may be aggregated together through online networks and restricted equity securities distributed in return, without registering as a broker-dealer or as a JOBS Act “crowdfunding portal,” FINRA’s soon-to-be Cinderella stepchild. William Carleton, an attorney that has watched the JOBS Act implementation closely and regularly writes about it at Crowdsourcing.org and his own blog, calls the publication of the two letters “momentus.” While cautioning that no-action letters only establish a “green zone” within which certain activities are allowed given specific conditions and contexts, he still nonetheless believes they were meant to sketch out a framework for exempted crowd fund-raising and investment. “[I]t is fair to say that no-action letters are rarely, if ever, as high profile as these two,” Carleton wrote.