Carbonite’s IPO Shows Banks Don’t Have a Clue

So in the midst of market insanity Carbonite – an online back-up service – goes public.  Carbonite’s IPO shows the tough keep going — Cloud Computing News.

That it went public at all is interesting because of the insane tape.  But that’s not the really interesting stuff.  More interesting is:

a.) It went public at a valuation of $240 million when conventional wisdom has said since 2001 that the market won’t do $250mm IPOs.

b.) No profits, negative cash flow.

c.) Range was off by 48% (mid-point to placement)…

I suppose some of the last point could be attributed in part to the market volatility, and the deal, now trading 40% above its placement, has to be considered successfully priced (for now).  But the question still remains – how did they get the range wrong by so much when marketing the deal initially  – last I checked the market didn’t fall 48% between Thursday of last week and close of trading Wednesday.

Either way, the point is that this IPO (which defines the kind of IPO “can’t get done”) got done in a tumultuous market.  This of course begs the question, what were banks doing in late ’09 and 2010 when the IPO window was mostly closed to companies that had profits and cashflow but the market was way less unsettled than now?

Banks continue to have serious difficulty properly identifying demand in the capital formation process – both how much, and more importantly if there is sufficient at all (and forget about actually trying to qualify the value of different capital to an issuer).  A big part of the reason is that they don’t have any mechanism to do so for large swaths of the capital in the market.  This makes the IPO market way more volatile than need be – both in price and ability to get deals done – to the detriment of pretty much everyone except those investors lucky enough to be allocated shares on the IPO.

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