This Week In Finance

"Technology Offerings and IPO Volume: The Year 1999 in Review"

For the last few years, technology stocks have been getting a great deal of ink - whether the article is focusing on "dot.com millionaires," unprecedented gyrations in market values, or the latest "high-concept" IPO. Well, the January 24th issue of Investment News provides some interesting information about technology offerings in 1999.

Just how important were technology-related issues in 1999? Consider the following:

In 1997 and 1998, approximately $43 billion and $37 billion were raised via initial public offerings, respectively. Of these amounts, technology-related offerings accounted for 26 percent and 24 percent of the money raised. In 1999, however, IPO volume totalled $68.9 billion, and of that amount $39.3 billion (57 percent!) was technology-related.

Put another way, non-technology IPO volumes were $32 billion, $27.9 billion, and $29.6 billion in the years 1997-1999. Ho-hum. But annual technology-related IPO volumes over the period were $11.3 billion, $8.6 billion, and $39.3 billion (!). Do we Finance academics need to continue to debate whether or not financial managers exploit "windows of opportunity" when making financing decisions? Hah!

Finally, the article suggests that we are about to see a sea change in the way IPOs are marketed. Until now, the shares of the hottest IPOs were parceled out to the broker's best (read: most commission-generating) clients. And, of course, the remaining clients received more than their fair share of the IPO dogs. Woof-woof! Can you say "Winner's Curse?"

Now, however, IPO issuers are "clamoring for the retail investor base to be included in the [IPO] process" which could result in "a bid by online brokerages to crack open an IPO market that has been reserved for the super wealth and the well connected." Sounds like we in the academic Finance profession may have to re-think our models if things continue to evolve!