This blog focuses on IPOs, including legal and regulatory developments affecting the IPO market, analysis of market practices, and information of interest to all companies planning or hoping to go public. Blog host David Westenberg, a partner in the firm's capital markets group, is one of the country's foremost authorities on IPOs. He writes and is quoted frequently on the IPO market, and is the author of the acclaimed book, Initial Public Offerings: A Practical Guide to Going Public. You can also follow him on Twitter: @DWestenbergIPO. 

A note on data

Many providers of IPO data include "IPOs" by REITs, SPACs, bank conversions, closed-end investment trusts, oil & gas trusts and partnerships, and other non operating companies that are not true IPOs. This is why IPO data from different providers varies and often is overstated, sometimes by large amounts. The IPO data we present in this blog excludes these types of offerings in order to present the data that is most relevant to an operating company contemplating an IPO. In addition, because various requirements for foreign issuers are different than the requirements applicable to US issuers, the market analyses in this blog are based on US issuers only. All IPO data in this blog was compiled by WilmerHale based on our review of SEC filings.

December and 2013 Year-End IPO Market Review

January 29, 2014 4:25 PM

The IPO market regained some of its luster in 2013. Highlights for the year included:

  • The year produced 178 IPOs—the third highest annual total since 2000, trailing only the 198 IPOs in 2004 and 193 IPOs in 2007.
  • The final three quarters of 2013 each produced 50 or more IPOs—a level of consistently high activity not seen since 2000.
  • The six billion-dollar IPOs in 2013 represented the highest annual tally since 2004, when there were seven billion-dollar IPOs.
  • The 21% average first-day gain in 2013 was the best annual figure since the 53% average first-day gain in 2000.
  • There were six "moonshots" (an IPO that doubles in price on its opening day) in 2013. The 12-year period from 2001 to 2012 produced a total of only 10 moonshots, with no single year seeing more than a pair.
  • The average year-end gain of 47% for all IPOs in 2013 was the highest annual figure since the dot-com era.

From 2003 to 2012, December was on average the second busiest month for IPOs, trailing only November. On the heels of three consecutive months with at least 20 IPOs, the December 2013 IPO market produced only 11 IPOs—the lowest monthly total since April 2013 but only two IPOs below the December average over the preceding 10 years.

Gross proceeds of $4.37 billion for December were lifted by Hilton's $2.35 billion IPO—the largest IPO of 2013. The year's gross proceeds of $41.27 billion were 18% above the 2012 total of $35.11 billion and the second highest annual level since 2000, behind only the $43.33 billion in 2007.

The 2013 IPO market was dominated by emerging growth companies (EGCs), which produced 82% of all IPOs—slightly higher than the 76% market share for EGC IPOs in 2012 following the enactment of the JOBS Act in April 2012.

The number of IPOs by venture capital–backed US issuers increased 39%, from 51 in 2012 to 71 in 2013—a single IPO below the post-boom peak of 72 in 2007. The number of IPOs by private equity–backed US issuers increased by 75%, from 28 in 2012 to 49 in 2013—only three below the 52 in 2006 (the highest tally since at least 1996). VC-backed and PE-backed company IPOs accounted for 50% and 35%, respectively, of all US-issuer IPOs in 2013.

December capped the year with three life sciences IPOs, bringing the year's total to 50—28% of all IPOs, and seven more than the aggregate of 43 life sciences IPOs in the three years between 2010 and 2012.

The average IPO company enjoyed a 21% first-day gain from its offering price in 2013, surpassing the 16% average first-day gain for all IPOs in 2012. The percentage of "broken" IPOs (IPOs whose stock closes below the offering price on their opening day) rose from 20% in 2012 to 22% in 2013 but still represented the second lowest percentage of broken IPOs since 2006.

The average 2013 IPO ended the year 47% above its offering price compared to the year-end gains of 26%, 38% and 30%, respectively, for the Dow Jones Industrial Average, Nasdaq Composite Index and S&P 500.

The median offering size of $107.4 million in 2013 was 14% higher than the median offering size of $94.3 million in 2012. The median deal size for VC-backed companies was $78.0 million—the lowest level since the $72.0 million median in 2006—while the median deal size for non-VC backed companies was $226.7 million, 55% higher than the prior 10-year average of $146.0 million. The median deal size for EGCs, at $95.9 million, was less than a quarter of the $419.1 million median deal size for other IPO companies.

The median annual revenue of IPO companies decreased by one-third, from $133.6 million in 2012 to $89.9 million in 2013—the lowest level since the $74.5 million median in 2007. Emerging growth companies had median annual revenue of $61.5 million compared to $2.54 billion for other companies. Median annual revenue for EGCs in 2013 was down 43% from the $107.8 million in 2012, in part due to the higher number of life sciences IPOs. Life sciences IPO companies in 2013 had median annual revenue of just $10.0 million, although this was more than quadruple the $2.4 million figure over the prior three-year period.

With interest rates at historic lows and investors more eager for growth than profitability, the percentage of profitable IPO companies declined from 55% in 2012 to 43% in 2013—the lowest level since the 26% in both 1999 and 2000. Only 27% of this year's life sciences and technology related IPO companies were profitable.

IPO activity in December consisted of offerings by the following companies listed in the order they came to market:

  • Xencor, a clinical-stage biopharmaceutical company focused on discovering and developing engineered monoclonal antibodies to treat severe and life-threatening diseases with unmet medical needs, priced an upsized IPO at a lower revised price and produced a first-day gain of 52%.
  • Kofax, a leading provider of smart process applications software and related maintenance and professional services, priced within the range and ended its first day with a gain of 14%.
  • Autohome, the leading online destination for automobile consumers in China, priced above an upwardly revised price range and gained 77% on its first day.
  • ARAMARK, a leading global provider of food, facilities and uniform services to education, healthcare, business and industry and sports, leisure and corrections clients, priced at the low end of the range and saw a first-day gain of 14%.
  • Hilton Worldwide, one of the largest and fastest growing hospitality companies in the world, priced an IPO upsized by 4% within the range and ended its first day of trading up 8%.
  • Kindred Biosciences, a development-stage biopharmaceutical company focused on saving and improving the lives of pets, priced an IPO upsized by 30% at the midpoint of the range and gained 71% on its opening day.
  • Scorpio Bulkers, an international shipping company operating the latest generation of dry bulk carriers, more than doubled the number of shares offered and declined 3% on its first trading day.
  • TetraLogic Pharmaceuticals, a clinical-stage biopharmaceutical company focused on discovering and developing novel small molecule therapeutics, priced an IPO upsized by 10% at the estimated offering price and ended its first day flat.
  • Fidelity & Guaranty Life, a provider of fixed annuities and life insurance products, priced at the low end of the range and gained 11% on its opening day.
  • Nimble Storage, which has designed and sells a flash-optimized hybrid storage platform, priced above the range and ended its first trading day with a gain of 62%.
  • AMC Entertainment, one of the world's largest theatrical exhibition companies, priced at the low end of the range and saw a first-day gain of 5%.

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