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    “The (Hot) IPO Market” or “Do Profits Matter?”


    With the apparent resurgence in the IPO market, it seemed timely to revisit my last blog What to know before you IPO and ask, “what’s changed?”

    After doing a little digging, it seemed to me there are several points worth making, which haven’t really been front and centre in the popular press. Namely:

    1. Yes, the IPO market has recovered from the depressed levels of past years, but it’s still at low levels;
    2. The markets appear to be primarily focused on revenues and less so on earnings;
    3. High valuation levels being accorded IPOs is at least one of the driving factors of this resurgence and there is a growing gap between valuation of revenues and profits that should provide a cautionary note for investors.

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    What to know before you IPO

    Last weekend, I finished reading Rod McQueen’s “BlackBerry: The Inside Story of Research in Motion” and thoroughly enjoyed it. It got me thinking about one area devoted relatively little space in the book – the entrepreneur’s decision to go public.

    Now, in 300 pages recounting the 25 year history of perhaps Canada’s most successful technology company, you may figure 20 pages is sufficient to devote to the issue of going public. For the record, Research In Motion (RIM) completed a private placement of $34 million to institutional investors in June 1996 (12 years after Mike Lazaridis had started the company) and then completed a full blown IPO in October 1997.

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