Tags: tech | companies | IPO | cash

WSJ: Young Tech Companies Safe from Quick Burn Through Their Cash

By    |   Wednesday, 14 May 2014 12:47 PM

While some financial commentators say the initial public offering (IPO) market for technology companies is in a bubble, the situation may not be so dire.

A Wall Street Journal analysis of 148 U.S. tech companies with recent or pending initial public offerings shows that none of them is spending at a pace that would exhaust their cash reserves within a year.

That good news on the cash front represents quite a contrast to March 2000, when the dot.com bubble burst. Barron's reported then that 25 percent of Internet companies were spending at a pace to burn through their cash within 12 months, which many did.

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To be sure, the tech companies that did IPOs this year and last on average weren't performing as well financially as companies that went public in 2011 and 2012 have, The Journal reports. But recent tech IPOs are still performing better than during the last tech boom 15 years ago.

And the tech companies that have issued IPOS this year are on average almost three times older than were the ones 1999, University of Florida finance professor Jay Ritter tells The Journal.

Some experts say the recent decline in technology stocks has taken away at least some of the market's froth.

"From a valuation standpoint there's a little bit more sanity, a little bit more concentration [on fundamentals] than there was a few months ago," Andrew Boyd, head of global equity capital markets at money-management titan Fidelity Investments, tells Quartz.

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While some financial commentators say the initial public offering (IPO) market for technology companies is in a bubble, the situation may not be so dire.
tech, companies, IPO, cash
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2014-47-14
Wednesday, 14 May 2014 12:47 PM
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