Goldman Sachs’ co-head of investment banking for global telecommunications, media and technology Anthony Noto said tonight that he’d be surprised if there’s another IPO for an Internet company before Labor Day.
Facebook’s controversial offering has already shelved other deals from companies like Kayak, as public investors have driven down the value of newer consumer web companies. Facebook is now is at $28.23 in after-hours trading, down from the $42.05 price it opened at last month. Zynga is now worth $3.7 billion, down from the $14 billion valuation it commanded from private investors in February of 2011.
“If you go public now, you have to have a high quality company that doesn’t have a business model in transition. If you haircut the estimates and haircut valuation, you can go public,” Noto said at the F.ounders conference in New York today.
“I think it won’t be until after Labor Day that we’ll see a public offering [from an Internet company],” he said.
He added that companies considering public offerings need to be wary of pricing based on demand from retail investors. “You have to price off institutional demand. “If there’s any uncertainty in the trading of the stock during the first couple days, retail investors are going to run.”
Even though Facebook, Groupon and Zynga shares haven’t done so well post-IPO, the older Internet companies like IAC and Amazon are ironically doing better, he said. They’ve balanced out the sluggish performance of companies like Groupon. “The weighted average for consumer web companies hasn’t actually changed,” he said.
Like other venture capitalists have said recently including Union Square’s Fred Wilson and Kleiner Perkins’ Mary Meeker, Noto said private markets will have to cool a bit to make sure exit multiples still make sense for late-stage investors.
“Private market valuations were headier than they were in the public market,” he said. “I actually think private capital will be harder to get and much more expensive. The exit multiples have been reset.” This might prompt a wave of M&A deals as companies opt to sell instead of wait it out.
Benchmark general partner Bill Gurley, who interviewed Noto, joked: “You’re assuming rational behavior by late-stage investors?”