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Yes, We Knew Tech IPOs Were Coming, But We Didn't Expect It This Soon
from the signs-of-the-exuberance dept
Only a few days have passed since we wrote about the looming crop of IPOs on the horizon. The IPO of direct marketing software provider, Constant Contact, caused a stir as hit the street with a surprisingly warm reception. Opening the day at $16, $2 more than the initial estimates, the price rose to over $30 during the first day of trading. This despite the fact that Constant Contact is not yet profitable -- which people had been saying was necessary this time around for IPOs. Investors are clearly banking on speculative growth of its revenues, which are expected to double for 2007 versus 2006. That said, IPOs of unprofitable companies are popular cannon fodder for the many "return of the bubble" rumors that are already starting to spread, and certainly should turn up more interest both in Silicon Valley and on Wall Street for starting to explore what internet firms could potentially go public.
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Not only not profitable
Its not only nonprofitable company, its a company with declining margins in a highly competitive industry. The barriers to entry are nil, so its hard to bank upon high growth one day leading to high profits especially since sales and marketing expenses are the main growth drivers. I'm curious how long it takes for the dumb money realize this is a sign of irrational exuberance
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There have been many tech IPOs over the past year that were unprofitable companies at the time -- this is hardly the first. And a lot of those stocks have done well. Go figure.
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IPOs
What other tech IPOs are expected?
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