Over on the Left Coast, the turmoil in the New York markets certainly feels a long way away.

In fact, given what’s happening elsewhere, the mood today at one of Silicon Valley’s top financial conferences seems almost complacent (no doubt it owes something to the location, on a remote bluff overlooking the foggy Pacific Ocean.)

And why not? Venture capital worldwide is likely to top $40bn this year for the first time since 2001, and IPO stocks in the US are up 20 per cent since June, compared with a 1 per cent  rise in the Nasdaq. That lubricates a lot of new deals for the financiers and entrepreneurs mingling here.

So it’s a good thing that Paul Wick of J&W Seligman, one of the biggest specialist tech mutual fund investors, was on hand today to cast a cold eye over the good and bad of what’s been happening in the IPO market.

Asked whether he thought any investment banks led better IPO deals than others, he certainly did not shirk the question:

"UBS has underwritten a lot of clunkers," he said, starting with but not limited to Vonage. Then there’s Needham, which "has underwritten lots of crummy companies - [though] they have also on occasion had something everyone has overlooked that has been a diamond in the rough."

Even Goldman Sachs, which he generally credits with backing good companies, does not escape the scorn. "Glu Mobile was a real clunker," he said of the mobile games company whose shares were priced by Goldman at $11.50 in an IPO earlier this year and now change hands for around $5. But then, that should have been an easy one for investors to spot: "The Glu Mobile CEO previously rode 3dfx [Interactive] into the ground."

Then there are the sell-side analysts, who were meant to have cleaned up their act after the scandals of the dotcom bubble.

"The sell-side has gotten worse and worse over the years in sucking up to the VCs and sucking up to the public companies," according to Wick. "It’s really quite disturing." He points to coverage of companies like Data Domain, whose rising stock prices seem to be an excuse for analysts to simply raise their price targets higher.

"As you get close to the 6 month lock-up date [for Data Domain], suddently everyone’s target prices have crept up," he complains. "It’s really bothersome for those of us trying to navigate the public markets. What we see happening, the sell-side totally ignores the fact that there’s a ton of competition coming at them in 2008, a lock-up expiration is coming. We’re supposed to just hang on to these things - and buy more."

For good measure, Lise Buyer, a former sell-side analyst who masterminded Google’s IPO, had this to say about the latest crop of new internet companies: "Putting a double vowel in the name of a company doesnt actually guarantee a better valuation." You have been warned.

December 6th, 2007 in Tech Finance | Permalink