According to PwC, the US IPO market showed significant strength in the first quarter of 2012, resulting in the highest first quarter volume since 2007. The U.S. IPO market continues to attract a diverse range of companies across different industries, according to PwC. The technology, industrial and financial services sectors were the most active during the first quarter, contributing thirteen, nine and nine IPOs, respectively. In terms of value, industrial companies led with $2.1 billion, representing 36 percent of total capital raised in the first quarter of 2012.
Thirty-six of the 44 IPOs in the first quarter of 2012 were backed by financial sponsors which accounted for $4.8 billion of total quarterly proceeds. Financial sponsor-backed companies represented 82 percent of the total volume and 83 percent of the total value of IPO activity in the first quarter. This is in line with the first quarter of 2011 when financial sponsor-backed IPOs represented 70 percent of the total volume and 86 percent of the total value.
“Financial sponsors continue to play a major role in IPO market activity, as they seek to fully monetize key portfolio investments in an improving climate for the capital markets, particularly in the technology sector where all the technology IPOs in this quarter were backed by financial sponsors,” said Henri Leveque, leader of PwC’s U.S. Capital Markets and Accounting Advisory Services. “As the year unfolds, we expect the IPO pipeline to continue to reflect a high proportion of financial sponsored companies as private equity and venture capital firms seek to raise capital, build liquidity and pursue new acquisition opportunities globally.”
Average post-IPO returns for offerings that priced from January 1, 2011 to March 31, 2012, entered into positive territory, ending the first quarter up an average of 13 percent from IPO price, reversing losses at the end of 2011. This positive reception by the investor marketplace demonstrates improved optimism about new issuers with sound fundamentals and a solid growth plan, according to IPO Watch, a quarterly and annual survey of IPOs listed on U.S. stock exchanges by PwC’s Transaction Services practice.
The current IPO pipeline (companies that have filed for an IPO in the last twelve months but not yet priced) remains high at 157 companies, representing a slight decline of 8 percent from year end 2011. The IPO pipeline is led by three industries contributing 60 percent of total pipeline volume, which includes the technology (24 percent), industrial (18 percent) and financial services (18 percent) sectors.
“Continuing on the increase in IPO activity in the fourth quarter, we saw strong first quarter IPO volume and filing activity, which coupled with the increased investor interest in IPOs, bodes well for the year ahead,” said Mr. Leveque. “The IPO pipeline remains healthy with a diverse range of companies exploring public launches, with notable strength in the technology, industrial and financial services sectors. Major IPO activity from some of the larger well-known technology players, including Facebook, will likely lend support to a host of smaller technology companies looking to enter the public markets.”