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SurveyMonkey Funding Plans Point To Weak IPO Market

When online Survey provider SurveyMonkey announced earlier in the month that i

When online survey provider SurveyMonkey announced earlier in the month that it had initiated a $800 million recapitalization plan, the financial decision of this highly-visible technology firm was interpreted by many as being evidence of a week market for initial public offerings (IPOs).

SurveyMonkey Finance Decisions

According to Reuters, the hesitance of SurveyMonkey to hold its primary offering indicates a new trend of Silicon Valley to hold off on having flotations long past the point where they have generated the revenue and earnings benchmarks that would prepare them for highly-lucrative IPOs in previous years.

"We're not saying we're never going public," Dave Goldberg, chief executive of SurveyMonkey, told the news source. "This was a better path for us, and it would save us some of the hassles of running a public company."

The top executive of the online survey provider has already taken a company public, and the seven years he spent working at internet giant Yahoo came along with various decisions made to provide the company stock with a short-term boost, according to Fortune.

Goldberg has had experience with the high-profile IPO that Facebook had in 2012, since his wife, Sheryl Sandberg, serves as chief operating officer of the company."There are lots of good reasons for going public," says Goldberg, ticking off growth capital, brand recognition and credibility with business customers as chief examples. "We just don't have any of them."

Industry Trend

Reuters reports that this hesitance of going public is not only shared by Goldberg, there are many chief executive officers of venture-backed firms that are more than ready to start issuing stock in a primary offering. Bringing one's company public may have been perceived as a great achievement before, but this event has deteriorated in the eyes of many.

There have been many IPOs that are considered to be botched. Facebook held the most visible primary offering of 2012, with stock that initially sold at $38 in May and then dropped to $20 in September, according to the news source. Recently, the company stock has been valued slightly above $30 per share.

A more severe example is daily deals company Groupon, which sold shares for $20 apiece late in 2011 and is currently trading close to $5. Social media game developer Zyngasold shares for $10 each late in 2011 and then plunged to $2.50. These companies held flotations, fell upon hard times and have encountered great challenges in recovering.

SurveyMonkey Finance Plan

The debt plan of the online survey provider includes $444 million in equity and another $350 million in debt financing, the media outlet reports. Current shareholders of SurveyMonkey, including certain employees, are selling the equity stake of the company. The funding values the company at a total of $1.35 billion.

Tiger Global Management is leading the equity tranche, and Lee Fixel, a partner in the company, will take a seat on the board of directors of SurveyMonkey. Search engine giant Google is taking part, and executive David Lawee will become a part of the board of directors as an observer.

The $350 million in debt financing that the company expects to generate will be led by major financial services firm JP Morgan, Goldberg told the news source. He stated that in 2012, the company generated revenue of $113 million and earnings before interest, depreciation, taxes and amortization of $61 million.

One reason that companies may want to avoid holding IPOs in the current financial climate is that the market for these offerings can change very quickly. Investors are currently dealing with significant uncertainty in the form of the pending debt showdown between U.S. lawmakers, as well as continued fiscal challenges in Europe.

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