Can Tech IPOs Inspire New Market Debuts?

After two years of a very slow public offering market, the appetite for new issuances has finally picked up with a couple of new deals on the horizon. How tech darlings Skype and Demand Media fare in their IPOs will go a long way in telling the investment community whether now is a good time for venture capitalists and private-equity firms to again start looking at a market debut as a viable exit strategy. IPO experts say the recent news of the tech firms' intent to go public will likely fuel renewed interest in the lagging IPO market, as tech offerings have often proven themselves successful. “There’s just a higher probability of finding an extreme winner, a lottery ticket with a tech IPO than with any other kind of IPO,” said Josef Schuster, founder of IPOX Capital Management in Chicago. “If you’re buying a financial IPO or a slow-growing company, that’s probably not as attractive.” Schuster explained that a lot of strong public offerings in the tech sector have come about as a result of the good performance of the Nasdaq Composite in recent years, among other things. The exchange’s general outperformance of the Dow Jones Industrial Average and the S&P 500 over the past five years has helped buoy confidence in the sector, as it has increased 1.5% since September 2005, compared with the Dow Jones Industrial Average’s 2.3% decline and S&P 500 Index’s 11.5% decline. Of the two tech companies that recently filed to go public, Skype has analysts most excited, as the company is already profitable and continues to expand its reach globally. Skype is backed by underwriters including Goldman Sachs GS, JPMorgan Chase JPM and Morgan Stanley MS, and had 124 million users as of June of this year. Couple that with the more than $400 million in revenue generated in the first half of 2010, and a profit of $13 million, and you have a company with some exciting prospects for growth. To read the rest, head over to FOX Business.