When Needham, Mass.-based business-to-business publisher TechTarget went public in May 2007, the initial public offering (IPO) made ripples as much for its singularity as for what it revealed about the success of the then-8-year-old company. While IPOs have not vanished all together in the years since the dot-com frenzy of the late ’90s—March saw 21 filings, according to IPOHome.com—they have been few and far between in the publishing sector.
“I’ve actually seen the trend move backwards,” says Michael Norris, senior analyst at Simba Information, which tracks the media and publishing industries. For example, Norris notes, “[Religious book publisher] Thomas Nelson was bought by a private equity firm in ’06 and made private. Reader’s Digest [Association] was bought out by a private equity firm and is no longer publicly traded.”
Companies usually want to show significant, consistent growth if they expect to have a successful IPO, one of the factors that makes such a move difficult in the current business climate, says Scott Sweet, managing director of IPOBoutique.com, an IPO advisory services firm.
“Right now is not a good time for the publishing industry based on the existing trends,” he says. “Major institutions as well as retail buyers are very suspicious of buying new IPOs with an unseasoned company compared with … [one] where they can see numbers going back years and years. At this point, unless I looked at the publication and found it out of this world and truly beyond the competition, I would find it unlikely [I would want to invest],” he continues. “I would find it a very difficult proposition to bring a company public right now and expect to get the proceeds they may have been able to get even last year.”
Still, as TechTarget’s successful IPO proves, such a move can be a smart decision for a publisher—even a young one—with a track record of steady growth and a demonstrated understanding of industry trends.