Non-US issuers and financial sponsors increase their presence
NEW YORK, Nov. 14, 2007 – As expected, US IPO activity for the third quarter of 2007 declined from the robust activity witnessed in the second quarter when 71 IPOs generated $21.0 billion. However, the 44 IPOs that raised $11.5 billion during the third quarter outperformed Q3 2006 when $8.0 billion was raised from 39 IPOs. In terms of proceeds, non-US issuers contributed 44% to the total quarter value, up from 18% in Q2 2007 and 11% in the third quarter of 2006. Financial sponsor backed IPOs comprised 25 of the 44 deals during the third quarter.
“A solid third quarter performance coupled with the robust first half suggests 2007 will likely outpace 2006 in both the number of IPOs and offering value," said Scott Gehsmann, a capital markets partner in PricewaterhouseCoopers' Transaction Services group. "We are well on our way to exceeding 2006 IPO activity, when 241 IPOs raised over $50 billion," Gehsmann added.
Of the 44 IPOs during the third quarter, only one transaction raised more than $1 billion versus five in the second quarter of 2007. However, the top five deals accounted for over 50% of the quarter's total proceeds compared to 46% in Q2 and 42% in the third quarter of 2006. Two of the top five offerings were from non-US issuers.
The top 10 IPOs raised $7.5 billion representing roughly 66% of total IPO value, a slight increase from the corresponding 62% for the third quarter of 2006. Driving the quarter's offerings value was the MF Global Ltd IPO which raised $2.9 billion or 39% of total proceeds generated by the top 10. Five of the top 10 offerings were financial sponsor-backed IPOs compared to three in the third quarter of 2006.
While the turmoil in the credit markets presented some new challenges, a number of key trends noted in Q2 carried into the third quarter, including the technology/infocom and financial services sectors leading IPO offering volume and value, respectively.
- Technology/infocom led in IPO volume. Twelve IPOs raised $1.7 billion. Of the twelve, six were software and computer IPOs that generated a total of $1.4 billion or 82% of the proceeds raised by technology/infocom companies.
- Financial services led in IPO value. Financial services accounted for 38% or $4.4 billion of total proceeds. The MF Global Ltd IPO which raised $2.9 billion comprised 67% of the financial services industry total. Of the eight IPOs, two were special purpose acquisition vehicles/companies (SPACs) or "blank check" companies that together raised $480 million. For the first nine months of 2007, SPACs raised a total of $2.6 billion compared to $1.6 billion raised for the same period in 2006.
- Financial sponsor-backed IPOs maintained their momentum. Financial sponsors, which include venture capital, buyout, mezzanine and private equity funds, completed 25 of the 44 IPOs in Q3. The 25 IPOs amassed $4.4 billion or 38% of the total proceeds raised in the third quarter of 2007. Compared with Q3 2006, the volume of IPOs backed by financial sponsors more than doubled, evidencing their growing presence.
From an industry perspective, financial sponsors were most active in business services with six deals generating $1.5 billion and technology/infocom with eight offerings raising $628 million.
- Foreign registrants remained active. China continued to lead in non-US issues. Non-US issuers raised $5.1 billion accounting for 44% of the total proceeds raised during the third quarter, a significant increase from the 18% contribution in Q2 and 11% in Q3 2006. China continued to be the most active player with four IPOs raising $578 million. The MF Global Ltd IPO ($2.9 billion) led in total proceeds raised by non-US issuers. Other non-US issuers were from Brazil, Greece, Ireland and Israel, each with one listing.
From January through September 2007, non-US issuers raised a total of $10.8 billion from 31 IPOs on US exchanges, a significant increase from the same period in 2006 when 14 offerings amassed $4.6 billion.
- NYSE led in value while NASDAQ led in volume. Continuing the trend from the second quarter, the NASDAQ led in IPO volume with 23 of the 44 IPOs raising $2.7 billion. The NYSE, with 17 IPOs, led in value with $8.3 billion. The AMEX with four IPOs raised $490 million.
IPO activity in the US continues to increase, as evidenced by the solid nine month results and the increased activity from non-US issuers and financial sponsors. "The IPO pipeline heading into the fourth quarter appears strong. Q4 IPO activity may challenge the robust fourth quarter of 2006 when 89 IPOs raised almost $20 billion," said Gehsmann
US IPO watch is a quarterly survey of all IPOs listed on US exchanges. These include IPOs by domestic and foreign companies, best-efforts, business development companies, filings with the FDIC, and bank demutualizations. IPOs do not include unit investment trusts and fully classified closed-end funds. This survey captures IPOs listed between July 1 and September 30, 2007. Visit our website,
www.pwc.com/ustransactionservices, for our 2004, 2005, 2006 and 2007 US IPO Watch reports.
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