IPO market's big test coming now

Aaron Pressman

The next two weeks ought to silence IPO market whiners, or at least that's my hope. Upcoming over the rest of this week and next, Wall Street has three challenging deals on tap. If they all succeed, despite a weak equity market over the past few days, the whining will end and the action will heat up.

Sagging turnaround story Burger King looks to raise $400 million or more later this week, while voice over Internet service slash cash burning machine Vonage is seeking over $500 million and Mastercard, the credit card giant with an overhang of legal liabities, is looking for more than $2 billion next week.

Proponents say private equity buyers have successfully turned around the ailing BK franchise, that Vonage is the market leader in the fast growing VoIP world and that Mastercard's legal troubles are a blip amidst skyrocketing credit card usage. I'm kinda skeptical about all three but at the very least we'll get a great test of the IPO market as the big three are priced. Vonage might be the most important indicator of all.

Since I wrote in February that the IPO market was looking to post its strongest year since the bubble burst, naysayers have complained that the market for venture-backed companies was still ice cold. Aside from the fact that there are plenty of companies to come public without a lot of the VC fodder, the Vonage IPO has the potential to heat up that segment as well. In 2005, its losses grew faster than revenue as the cost to gain new customers rose. Not a great sign of the future. Skype's announcement that it would offer free outbound calling also seems like a negative. If Vonage gets priced at or above the top end of its range ($18 a share) and/or takes a big jump before it marks its first trade, the floodgates ought to open for all manner of VC-backed companies.

Just since April 28 when Vonage finalized its pricing range, an indication the deal was likely to succeed, we've seen filings for Internet registrar Go Daddy, Craig McCaw's next-gen wireless play Clearwire and video software firm DivX. If you see that first trade for Vonage printed at $36 or something -- valuing the company's equity at $5.5 billion -- it's the start of a new era, well, sort of.

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