The glory days of IPOs are long gone (734 IPOs in 1996!), and IPO metrics continue to shift.  So where are we following the end of Q1 2013?  There were a total of 133 IPOs in 2012, and just 21 in Q1 2013 (compared to 39 in Q1 2012 (excluding in each case, closed end funds and offerings under $15M)).  But the 21 raised $6.4B in gross proceeds compared to the 39 that raised $5.8B.

At the end of Q1, there were 27 companies in the visible pipeline.  Since passage of the JOBS Act in April 2012, which permits confidential submissions until just before the IPO roadshow, it is hard to determine the total pipeline, but perhaps there is better likelihood that the companies in the visible pipeline might complete an IPO.  A little more than a third of the pipeline consists of healthcare-related companies with the next two largest sectors being technology and financial, at about 18.5% each.

The average IPO size continues to decline.  Since the beginning of 2011, there have been only 11 IPOs exceeding $1B in gross proceeds.  Excluding the Facebook IPO, the average size of a 2012 IPO was $198M, continuing the decline from over $542M in 2008.  Further, in 2012, nearly half of the IPOs resulted in gross proceeds between $50M and $250M.  The good news about this—at least for some—is that smaller investment banks, both established and relatively new, have more of a chance to lead manage the IPO.

Foreign-headquartered companies continue to disappear from the IPO market.  There were no foreign private issuer IPOs in Q1 although there were three in April.  And the Chinese have largely disappeared, probably because of continuing U.S. investor concerns about audit quality and ownership of assets.  However, 2012 did see a more diversified mix of foreign private issuer IPOs with 15 different countries being the headquarters for at least one foreign IPO.

Total dollar volume decreased by 50.7% for financial sponsor-related IPOs in 2012, as only five sponsor-backed offerings were larger than $500 million, compared to fourteen in 2011.  Sponsor-backed issuers accounted for about a third of the backlog at the end of Q1 2013.

While analysts have different views about the remainder of 2013, there is strong hope that if the economy continues to stabilize and there is more certainty about its path, IPO activity will continue to grow.

Sources:

William Blair & Company, Equity Capital Markets Review (January 2013) and Equity Capital Markets Update, 1Q13
IPO Vital Signs

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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