Companies going public hits drought

The number of U.S. companies going public fell sharply as the economy slowed in 2008, a research firm said.

In 2008, 43 companies went public, Renaissance Capital reported. The number contrasts sharply to the 272 that went public in 2007, USA Today reported Monday.

The often celebratory event of a private company offering its first shares for sale is in a virtual drought with no initial public offerings scheduled until mid-February, the newspaper said.

The stalled mechanism for raising capital puts an economic cycle on hold. Venture capitalists often offer a company to the public to fund their next investment, professor of finance Jay Ritter at the University of Florida said.

If this is protracted, it could be quite serious, Harvard University professor Josh Lerner said.

With IPOs shut down, young companies must rely on lenders that often charge high interest rates for companies without proven track records, the newspaper said. It puts pressure on growth companies, said Paul Bard of Renaissance Capital.