While Facebook will dominate the 2012 IPO market, there's still room for lots of other smaller players.



NEW YORK (TheStreet) -- While 2011 saw a frenzy of IPOs from hot Internet companies like Groupon(:GRPN), Zynga(:ZNGA) and LinkedIn(:LNKD), expect this year to see relatively fewer large-scale offerings.

There were 44 U.S. tech IPOs last year, nearly double the number of offerings of any other sector. Of these, around half were Internet companies, including four of the five largest Internet IPOs in U.S. history. Other than Facebook, the majority of tech IPOs in 2012 are likely to be relatively small.

But while investment bankers expect a similar number of IPOs in 2012 compared to last year, with the exception of Facebook, they anticipate smaller sized offerings.

"We expect to see generally smaller deal sizes, similar to 2010," said Frank Maturo, head of cash equity capital markets at Bank of America Merrill Lynch. "We've seen a number of big names in tech come to market in 2011, so average deal sizes for this year will likely be $200 million or less."

The average deal size of a tech IPO during the fourth quarter of 2011 was around $292.5 million, according to a report from PriceWaterhouseCoopers, almost triple the figure from a year earlier.

And while Facebook is expected to be a "complete blowout," according to one equity capital markets banker, who didn't want to be named citing firm policy, it's unclear if it will open up the flood gates for offerings from other companies.

"I think there's enough momentum, with or without Facebook," said the banker. "They'll clearly have a big influence, but won't open or close the market per se."

According to the latest reports, Facebook is eyeing a May IPO that could value the social networking giant at as much as $100 billion.

The tech market is likely to be supported in part by strong investor interest in Internet IPOs, despite a tepid performance from the sector last year. U.S. Internet IPOs saw a 17% decline in average return in 2011, according to IPO investment adviser Renaissance Securities.

Shares of Groupon, which opened up 40% in its Nasdaq debut in November, have since fallen 20%.

Pandora(:P) shares have also declined 20% since the online radio company's June IPO, while Zynga is down 5%.

"There's still an interest in consumer Internet companies and it's top of mind for investors and everyone in the world, frankly," said Todd Speece, head of technology and clean tech equity capital markets at Raymond James.

Investors, however, are becoming more diligent about evaluating buzzy tech companies than they may have in the past.

"We've seen an increasing interest among the portfolio managers in our account base to meet with late-stage private companies," said Terry Schallich, head of equity capital markets for Pacific Crest Securities. "Part of their motivation is to have a longer period of time to get to know the companies before they become public.

Besides the Internet sector, software is also expected to be a high point this year, with companies like data security services company Imperva(:IMPV), service revenue management firm ServiceSource(:SREV) and telecom expense management provider Tangoe(:TNGO) ranking as the top performing tech IPOs of 2011, according to Dealogic.

There's 35 tech companies in the IPO pipline, including high-profile names like Yelp, Kayak and Brightcove, as well as several in the so-called shadow back-log, meaning the company hasn't yet filed its S-1 but is expected to do so soon.

Other tech companies expected to go public this year include Twitter, Gilt Groupe and daily coupon firm Living Social.

As more marquee Internet firms go public, it remains unclear what 2012 will bring for markets like SecondMarket and SharesPost, which specialize in trading shares of private companies. In the last year there's been significant investor demand for companies like Facebook, Foursquare and Box.net which have chosen to remain private and take additional venture capital rather than access the public markets.

"Secondary markets may augment public markets but they're not going to replace the public markets," said Tom Fox, head of global capital markets at UBS at a recent IPO briefing with reporters.

--Written by Olivia Oran in New York.



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