Never underestimate the power of greed. Investors gobbled up as many venture-backed IPOs as the market could produce in October, hoping to cash in on the irrational exuberance that drove Google’s stock price up to more than $190 per share. The bet paid off: The average price of VC-backed IPO shares surged 32% in the aftermarket, the biggest monthly gain nine months.
In all, 14 venture-backed companies went public in October, raising $918 million and bringing the year-to-date total to $8.9 billion. In contrast, there were five venture-backed IPOs in October of 2003, raising a total of $288 million. The average issue size of the deals so far this year is $112 million, a $38 million increase from the $74 million average for the same period last year.
Amazingly, only one of the 14 new issues-China Finance Online-closed lower than its offering price. Still, the venture backers of China Finance couldn’t have been too distraught: IDG Technology Venture Investment’s shares in the company were worth in excess of $250 million, while Vertex Management’s shares were valued at more than $130 million.
The average closing price of the 14 new issues on Oct. 31 was $14.73, up 22% from an average IPO price of $12.09. Fully half of the group saw its share price increase by more than 20% in the aftermarket, with SmartPros leading the pack of brand new IPOs with a 200% gain in its share price.