IPO activity in Minnesota has slowed significantly in recent years amid the recession but is gradually picking up steam.

Two companies within the state completed initial public offerings of stock in 2010-New Prague-based Electromed, Inc., and Minneapolis-based SPS Commerce.

That equates to one more IPO this year than last and indicates a slight rebound from 2008 when Minnesota went through a drought with no IPO activity whatsoever.

As of December 21, 154 companies in the United States had gone public in 2010-up substantially from 63 in all of 2009 and a decade-low 31 in 2008.

Electromed's IPO netted the company about $6 million, which is being used to expand the size of the sales force and increase marketing efforts. SPS Commerce's IPO, meanwhile, netted it $26.1 million, which it's using for “working capital and general corporate purposes, including potential acquisitions.”

Joe Sullivan, director of corporate finance at Minneapolis-based Feltl and Company, Inc., told Twin Cities Business in late December that “our market clearly lags” behind other similar markets around the country when it comes to launching public companies. Feltl, a full-service stock brokerage and investment-banking firm, seeks out companies to take public and has been the lead underwriter for many Minnesota IPOs over the years.

Sullivan said he's noticed that there's a perception among many companies that they need to have a certain amount of revenue in order to go public because without it, they won't have a market cap that's institutional in size or a stock that will trade.

“We've shown with some transactions [that Feltl has underwritten]-like Electromed-that you can do it,” he said. A consideration that's more critical than liquidity is having a sound business plan that a company knows how to execute. Sullivan said that early-stage IPOs can be a great way for a company to get the capital needed to execute a business plan that will help it to grow.

In addition to the two companies that went public in 2010, three others filed for an initial public offering but either haven't yet completed the transaction or withdrew the filing altogether: Minnetonka-based Welsh Property Trust, Inc.; Amsterdam-based Tornier, whose U.S. headquarters is in Edina; and Plymouth-based Kips Bay Medical, Inc.

Dave Beal, a business journalist who writes a monthly column for Twin Cities Business, said it's not uncommon-even in a good economy-for companies to file for an IPO and not go through with it for various reasons. At least a handful of other companies have done so in recent years. However, “relative to the ones that do go public, the ones that file and don't go public-that ratio has probably increased since the '90s,” says Beal, who follows local IPO activity.

Beal said that even aside from recessionary considerations, there are numerous challenges in taking a company public. One is that there aren't a whole lot of local underwriters that specialize in smaller companies; most concentrate on mid-sized to larger companies. Feltl focuses on companies with approximately $15 million to $50 million in annual revenue.

Sullivan would like to think that IPO activity will continue to increase next year, adding that “we're certainly hoping to be able to do a few.” Beal, meanwhile, looks to the stock market.

“If the stock market is totally in the toilet like it was in 2008 and 2009, nothing's going to happen,” he says. “With it coming back some this year and last year, I think the expectation is probably . . . that the economy will slowly pick up steam next year and so maybe [IPO activity] would return to pre-recession levels.”