Initial Public Offerings and Opinion and Editorials

EDITORIAL: Lots of promising local firms in IPO pipeline

June 5, 2010

We journalists like public companies. They have to put out their financials for all to see, and the transparency is refreshing. Many private firms are hush-hush about even the most basic elements of their business.

But there’s a less self-serving reason we’re thrilled to see the Indianapolis area is building a healthy pipeline of firms primed to go public: It bodes well for our economy.

A growing, vibrant economy depends on stalwarts like Eli Lilly and Co. and WellPoint Inc., but also upstart firms that can grow at rates that are a distant memory for mature businesses.

Companies can remain private and still thrive, of course. But they usually don’t enjoy the same access to capital as firms that launch initial public offerings. IPOs provide an infusion of millions of dollars—and the opportunity to raise even more later through secondary offerings. That capital is the fuel that funds new investments and expansions.

Public companies that flourish also create impressive wealth—not just for investors but also for middle- and upper-management. These high-paying jobs are just what Indiana needs as it tries to play catch-up with other states in such measures as per-capita income.

The bad news these days is that most companies eyeing IPOs have had to put their ambitions on hold. The IPO market is sputtering. With the stock market volatile and investors rattled, this isn’t an attractive time to bring new issues to market.

The good news, as IBJ reported last week, is that the region is building a stable of companies that boast the rapid growth and strong market positions IPO investors covet. Many of the firms have continued to scoop up venture capital as they wait for better times.

A few of the splashier names with IPO potential: marketing software firm Aprimo, e-mail marketing firm ExactTarget, ratings service Angie’s List and cancer drug developer Endocyte.

The fact local entrepreneurship attorneys nowadays can rattle off those and many other names as having IPO mettle is a sign our business community is changing for the better.

Hoosiers long have been shackled with the reputation of being risk-averse, and the state lags in national rankings of IPO activity. To be sure, companies taking the risky plunge into public markets sometimes fail. But others succeed in spectacular fashion. There’s something to be said for swing-for-the-fences management.

Consider Republic Airways Holdings Inc. A decade ago, when hard-charging CEO Bryan Bedford came aboard, the regional carrier didn’t even crack $100 million in revenue. He took Republic public in 2004, raising $65 million. The carrier has since gone on an acquisition spree that helped balloon revenue to $1.6 billion and employment to 10,300.

We’re confident the Indianapolis area is flush with upstarts with similar potential. We hope many of their owners think big and take the IPO plunge once the economy improves and the stock market stabilizes.•
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To comment on this editorial, write to ibjedit@ibj.com.

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