October 11, 2011
So Long, Tech Bubble of 2011
By Kevin Kelleher , InvestorPlace Technology and Markets Contributor
NEW YORK ( InvestorPlace ) -- Stock speculators and doom-mongers alike had such great hopes for the new tech bubble. Privately held shares of the hottest web companies commanded valuations in the tens of billions of dollars, ratcheting up with each SecondMarket auction.
Social media brands that ventured into the public market surged. LinkedIn(LNKD_) left many, including me, wondering if the mania of the dot-com days had returned.
But so much has changed since LinkedIn went public -- starting with LinkedIn's stock price: It's down 38% from its high point of $122.70, reached a few hours after it went public. And now a major investor is slashing its stake in the social network.
But more importantly, money is not flowing around so readily as it was this spring. The Fed's quantitative easing has ended, and unending financial turmoil in Europe is making investors risk averse.
In the first half of 2011, 78 IPOs priced on U.S. markets, up from 64 in 2010, according to Renaissance Capital. But the third quarter saw only 18 pricings, down from 33 in the third quarter of last year. Meanwhile, 20 companies withdrew their IPOs in the third quarter, compared with 11 for the same period a year earlier.
For much of 2011, however, the public and private markets have seen an unusual disconnect. The public markets grew so volatile at times that private equity seemed like a safe haven by comparison. While companies went public only to watch their stocks sink like a rock, the private trading on secondary markets saw valuations of names like Facebook and Twitter steadily rise.
Others had no problem raising money from venture capital firms, with late-stage rounds supplemented by even later-stage rounds that raised several hundreds of millions of dollars for web companies like Twitter and LivingSocial. If there was a tech bubble to be found, it seemed to be in the private markets.
But that may be changing, too. Venture firms have been raising less money than they are investing. A few years ago, many VC firms were turning money away from institutional investors, but no more. According to Dow Jones VentureSource, VCs invested $14.3 billion in startups in the first half of 2011, but raised only $8.1 billion. That gap has been growing since 2008.
http://www.thestreet.com/_yahoo/story/11274040/1/so-long-tech-bubble-of-2011.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
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