Taking The Economic Pulse.

• Position: Financial Executives International conference on initial public offerings - Brief Article

FEI put on a pair of dynamic and informative one-day conferences in late February in San Francisco, "Driving a Successful IPO" and the annual Treasurers Conference. Each offered attendees a chance to hear from industry experts, advisors and company executives about trends, best practices and new developments in the respective areas.

The IPO conference explored the state of the IPO market -- practically moribund -- and offered advice to finance officers and other top executives about what to expect and how to go about working with investment bankers, investors and others in the capital markets. For instance, in his keynote address, Daniel Case, chairman and CEO of J.P. Morgan Chase H&Q, emphasized that liquidity is generally adequate, and that when it isn't, that's generally because of perceived risk.

Case noted that there's a high correlation between the stock market and IPO activity, and with the stock markets depressed, the IPO market has followed. January 2001 was the slowest month in the IPO market since January 1980, he observed, and IPOs have fallen to just 6 percent of new issue financing on an annualized basis for this year, down sharply from 30 percent in 1999 and 25 percent last year.

But Case painted himself as a cautious optimist, arguing that business cycle times are getting shorter. He added that coming to market in a quiet time can be a good thing, both for company visibility and for getting good distribution of the new stock. Some of the biggest technology firms today, in fact, went public in slow times, he said.

In a succeeding panel, Timothy Draper, founder of Draper Fisher Jurvetson, a venture capital firm, noted that VC firms tend to see IPOs as a beginning and not an end, adding, "We're often the last ones to sell." He outlined a series of requirements for success, as well as red flags. The requirements include: leadership in the field, awareness of the company in the marketplace, a welcoming response by the markets and confidence in ongoing profitability for two to three quarters. Red flags include: a sense that the founder wants to bail out, a company's insistence that it needs to go public right now and a merger before a public issue that may itself raise problems.

Gordon Stitt, CEO of Extreme Networks, chronicled the history of the firm's financings, which were initially private. In 1998, when the firm finally did its IPO, it faced a market that...