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The stock market took another fall Wednesday, with the Dow dropping more than 4.6 percent. Amid the slide, one Boston firm went public in an IPO. Carbonite begin trading Thursday morning on the Nasdaq exchange under the ticker symbol CARB.
The markets' recent volatility came at a cost for the cloud data storage company. Carbonite had initially wanted to raise $107 million, but raised only $62.5 million in its initial stock offering. And that may make it the last Massachusetts company to do an IPO for a while.
Timing has a lot to do with it. Dunkin' Donuts had a great IPO a few weeks ago, raising more money that it was asking for. And then there‘s Carbonite.
"After the sell-off that we’ve had, investors are not interested in pie-in-the-sky ideas," said David Menlow of IPOfinancial.com. "They’re looking for companies that have a proven track record in their ability to make money."
Menlow called this month's debt-ceiling crisis in which the country almost defaulted on its debt and lost one of its triple-A ratings a "debacle" and said it soured investors on stocks.
Carbonite isn’t exactly the poster child of what they’re looking for. It is growing and its revenues are up. But it still hasn’t made a profit.
Menlow says the cruel truth is that Carbonite would have raised more had it gone public just a few weeks ago.
The new market reality won’t be lost on other local companies hoping to go public, says Zvi Bodie, who teaches corporate finance at Boston University.
"Companies that are issuing securities on the stock market to raise capital are now going to find it less attractive to do so," Bodie said.
Carbonite went ahead anyway. Like many tech companies scrambling for market share, it wants to grow fast and needs money to do that. The firm braved a volatile week on Wall Street to go public.
Others won’t be feeling so brave.
This program aired on August 11, 2011.
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