Despite the strong start of 2011 for US initial public offerings, the year ended similarly to 2010 – lots of hype and buildup, with little to show for it. The Eurozone crisis mid-year derailed early momentum. IPOs actually declined in volume by 20 percent (from 168 in 2010 to 134 in 2011) and in value by 9.2 percent, according to PriceWaterhouseCoopers. The fourth quarter of 2011 did not buck the trend, with only $6.4 bn in proceeds from 28 pricings, down 29 percent in value from fourth quarter 2010.

There is some cause for enthusiasm though. A few blockbuster IPOs late in the year and stronger capital markets in general seem to indicate more IPOs will get out in 2012. The first quarter of 2012 has already seen over 42 IPOs price, raising over $4.9 million, according to Renaissance Capital. Yelp had a strong showing out of the gate, with a 64 percent rise at the close of its first day; Proto Labs saw an 81 percent jump, and Caesars Entertainment rose 71 percent. The pipeline is even more encouraging, with just over 200 S-1s filed, the highest level since 2000, and the “shadow pipeline” of companies that have not yet filed with the Securities and Exchange Commission is even larger.

In spite of the improving environment for IPOs, the capital markets remain extremely volatile. Knee-jerk reactions from Wall Street create a shaky foundation for those companies moving through the IPO process. Companies need to develop a comprehensive and compelling communications strategy to address the new market realities, support the business strategy and maintain investor support for the longer term. Today it goes beyond a compelling investment story. Companies must be prepared to back up their investment story with strong fundamentals, good corporate governance, and proven management teams. This dynamic, combined with investors’ increased focus on longer-term performance, means there is very little room for error from the pre-filing period and beyond.

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