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Howard Gold
Feb. 18, 2011, 12:01 a.m. EST
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Time to call this a bona fide bull market?
First Take "º
Starbucks crowds Green Mountain's kitchen
By Howard Gold
NEW YORK (MarketWatch) "” Facebook. Twitter. LinkedIn. Zynga. Groupon. LivingSocial.
Will those be the Google Inc. /quotes/comstock/15*!goog/quotes/nls/goog (GOOG 625.26, +1.04, +0.17%) , eBay Inc. /quotes/comstock/15*!ebay/quotes/nls/ebay (EBAY 34.69, +0.23, +0.67%) and Amazon.com Inc. /quotes/comstock/15*!amzn/quotes/nls/amzn (AMZN 187.76, +1.14, +0.61%) of the next big wave of Internet companies going public, which appears to be happening as we speak?
One of my 10 surefire predictions for 2011 was that this year would be the biggest for Internet initial public offerings since the first dot-com boom. It's only mid-February, but barring a sudden market selloff, you can take that one to the bank. Read Gold's 10 surefire predictions for 2011 on MoneyShow.com.
Amid some media hand-wringing about a new dot-com bubble, IPO activity is picking up nicely; some Internet companies that already have gone public have done very well; this new wave of dot-com debutantes appears to be profitable (no pets.com here), and there's great investor interest that can lure some of the trillions of dollars in cash that's been sitting on the sidelines.
If you think this rally has been nothing but a government-induced bubble, you'll no doubt see this as yet another sign of a market gone mad. But if you believe the bull market has a way to go, these new issues may add fuel to the market's fire and could be a good place to put a small part of your money, and I'll tell you how later. Read Gold's commentary on why there may be lots more life in this bull market on MoneyShow.com.
But the boom is definitely on. According to Renaissance Capital, a Greenwich, Conn.-based investment firm specializing in IPOs, proceeds from global IPOs hit $176.1 billion last year, more than double the volume of either 2008 or 2009.
So far in 2011, $10.7 billion in IPOs have come to market, a 36.1% jump from the same time last year. And most striking, U.S. markets are setting the pace.
"In 2010, Hong Kong had half the global [IPO] market. Our share was 20%," said Kathleen Smith, a principal at Renaissance. "So far [in 2011,] our share is 55%," and Hong Kong has had no IPOs.
And although some of the stocks going public here are foreign companies with American Depositary Receipts, many are U.S.-based firms.
Of course, everybody's watching the new dot.com stars, most of which are still private, but probably won't be for long.
If there's a bubble, said Smith, "it's certainly in the pre-IPO market. There's more hype than I've ever seen on these companies before they've filed." The huge scarcity of privately traded shares may be a big contributor to that.
So far this year, we've seen Demand Media /quotes/comstock/13*!dmd/quotes/nls/dmd (DMD 21.48, +0.42, +1.99%) complete an offering, while Internet radio company Pandora Media and business-networking site LinkedIn already have filed prospectuses.
The pre-IPO valuations on some of these are jaw-dropping. Online coupon purveyor Groupon famously turned down $6 billion from Google and is now supposedly worth $15 billion. Internet game site Zynga is valued at $7 billion to $9 billion, social-messaging service Twitter at more than $8 billion, while LinkedIn may be worth $2 billion or more.
Facebook, as we know, recently secured a new round of financing from Goldman Sachs Group /quotes/comstock/13*!gs/quotes/nls/gs (GS 167.16, -1.65, -0.98%) and the Russian company Digital Sky Technologies that valued the social-media juggernaut at $50 billion.
Those numbers sound pretty outrageous, given the slim profits most of these firms have posted so far. But Smith points out that these companies will be profitable by the time of their IPOs "” unlike many that went public during the dot-com bubble "” and when they publish their prospectuses, investors will better assess their correct valuations.
Coffee giant's CEO opens the battle for home brewers' counter space.
6:40 p.m. Feb. 17, 2011
"Hong Kong shares gain in early trade as HSBC, China banks rise; Hang Seng Index up 0.3% http://on.mktw.net/gvxSAy" 9:06 p.m. EST, Feb. 17, 2011 from MarketWatch
"Japanese stocks weak in early trades: Nikkei Average down 0.1% http://on.mktw.net/gVljAf" 7:08 p.m. EST, Feb. 17, 2011 from MarketWatch
"U.S. stocks finish higher after weak start; energy sector fuels the advance http://on.mktw.net/gW8go3" 4:04 p.m. EST, Feb. 17, 2011 from MarketWatch
"Gold futures close at five-week high http://on.mktw.net/gmdjpL" 2:38 p.m. EST, Feb. 17, 2011 from MarketWatch
"U.S. stocks turn positive http://on.mktw.net/e2DaQV" 11:30 a.m. EST, Feb. 17, 2011 from MarketWatch
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