Through the first six months of 2011 proceeds from U.S. initial public offerings have significantly exceeded projections and are now expected to top $51 billion for the year in what amounts to a positive sign for the economy, according to a report from BDO USA L.L.P.
That increase has been boosted significantly by the tech industry, led by social media companies such as Facebook and Twitter who saw their use triple among Westchester and Fairfield County businesses over the last year alone.
However, with multibillion-dollar valuations being predicted for tech companies such as Groupon Inc., Twitter Inc. and Facebook Inc. following IPOs for Pandora Media Inc., LinkedIn Corp., and most recently the online real estate service Zillow Inc., there has been little consensus on whether the high valuations are merited, particularly since many of the up-and-coming tech companies have yet to turn a profit.
Liddy Karter, managing director of the Connecticut branch of Enhanced Capital Partners Inc., said pent-up demand that was built up over the course of the recession and the subsequent downturn has resulted in the initial success of many of this year”™s IPO filings.
“It has been painful for venture capitalists to not have initial public offerings and it”™s also been painful for investors,” Karter said.
“There”™s an opportunity for people to see tremendous returns on these investments, so they”™re acting on it.”
Asked whether there is an underlying value to many of these companies, Karter took a cautious line. “I think getting in and getting out of some of these valuations is a really good idea.”
Socially acceptable in business
While financial experts debate the valuations, there is general agreement among many Westchester business owners that social media is here to stay and is worth the investment.
Kristen Ruby, founder and CEO of Ruby Media Group, said that in the past year alone the amount of Westchester and Fairfield County companies engaging in some form of social media outreach has tripled, and that the most popular service has been Facebook.
“It is becoming critical for all businesses to have a Facebook fan page,” Ruby said, adding that the expansion of social media has necessitated the creation of an entirely new job category. “It is an entirely new job to have someone manage all outbound content via social media sites as it needs daily maintenance and posting.”
Moreover, Ruby said she thought the major players in the social media world would be around for the long haul.
“I do believe companies such as Twitter and Facebook will continue to perform very well in the next two to three years, specifically Facebook.” She said that while some companies will attempt to pry away some of the market share from Twitter and Facebook, such as Google Inc. with its new Google+ service, it will take years for people to migrate to new platforms.
“Keep in mind how long it takes people to become familiar and comfortable with these new sites,” Ruby said. “Once they are comfortable using a platform, they do not want to just jump over to a new one and re-learn everything.”
Ruby said of the companies she has worked with, restaurants, media organizations and management consulting firms have been able to best grasp social media, while so-called business-to-business companies have struggled, adding that many companies rely on the assistance of other organizations that specialize in social media.
”˜Potential for ”¦ a bigger and bigger thing”™
At Grand Prix New York, an indoor entertainment center and go-kart facility in Mount Kisco, social media has been pivotal to drawing new customers said Nat Mundy, vice president and co-founder.
“Right now the value is there for this kind of product.” He said that Grand Prix has used Groupon, Twitter and Facebook along with email and text messaging to promote events over the past several months. “It makes business move quicker and makes business move a little easier.”
Adam J. Stark, president of Stark Office Suites, which rents out office space in Mount Kisco, Harrison, White Plains and Scarsdale, said social media has had less of an immediate impact for his company but that he sees it as a necessary endeavor.
“We were very uncomfortable with the idea of not being a part of it all,” he said. “We”™re really still in a stage where we don”™t know what we have, but I”™m glad that we”™re doing it because I do believe that in the next few years there really is the potential for it to become a bigger and bigger thing.”
Stark said the investment in social media was dual-faceted and included the costs of bringing in people with expertise in social media for training in addition to the ongoing commitment to maintaining the company”™s social media presence.
Brian Eccleston, partner at BDO”™s Capital Markets Practice, said the increase in tech IPOs is a cause for optimism.
“It is overall a positive sign for the economy,” he said. “The substance of the companies ”“ they”™ve got real revenue, they”™ve got real customers and many of them have real products ”¦ The question is, how are they going to stand the test of time?”
Comments 1