On a career level, CFOs should worry about the collapse of the market for initial public offerings because it means “fewer attractive opportunities, and that demand for CFOs is going to go down,” a consultant at the firm warns.
David M. Katz – CFO.com | US
October 7, 2009
The market for initial public offerings — particularly among small-caps — is mired in a crisis, Grant Thornton capital-markets consultants contend. The debacle has been caused largely by wrong-footed regulatory and technological moves rather than the downturn in the economy, they say.
“Over the last several years, the IPO market in the United States has practically disappeared,” according to “Market Structure Is Causing the IPO Crisis,” a research paper issued by the accounting firm Tuesday. “While conventional wisdom may say the U.S. IPO market is going through a cyclical downturn exacerbated by the recent credit crisis, many experts are beginning to share the view of a new and much darker reality: The market for underwritten IPOs, given its current structure, is closed to 80% of the companies that need it.”
Citing figures from Dealogic and Capital Markets Advisory, the authors report that from 1991 to 1997, nearly 80% of IPOs were smaller than $50 million. By 2000 the number of IPOs smaller than $50 million had shrunk to 20% of the market. More recently, the first half of 2009 “represents the worst IPO market in 40 years,” according to the report, which adds that “[t]he trend that disfavors small IPOs and small companies has continued.”
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