Financial services, health care and business services remain bright spots
New York, October 24, 2006 – IPO activity declined during the third quarter of 2006 in terms of both volume and proceeds, with $7.98 billion raised through 39 IPOs, down from $10.91 billion raised from 57 deals in the second quarter. Compared with Q3 2005, there was 42 percent less volume and 20 percent less money raised in the US IPO markets. Deal size has held steady through the year, with the average third quarter deal raising $204.5 million, compared with $213.1 and $191.4 million in Q1 and Q2, respectively.
“Third quarter activity was in sharp contrast to the consistent pattern witnessed in the recent quarters," said Scott Gehsmann, North American leader of PricewaterhouseCoopers’ Global Capital Markets Group. "While one slow quarter is not a cause for concern, it could signal an inflection point if the downturn continues." For the year, 152 IPOs raised $30.8 billion on US exchanges compared with $29.9 billion from 164 IPOs during the first nine months of 2005.
Underlying recent trends was the withdrawal of several private equity-backed IPOs announced earlier this year. "Private equity firms tend to have more flexibility on exit strategies and the timing of IPOs than corporations," Gehsmann observed.
The top five third quarter deals accounted for 42 percent of proceeds raised, up sharply from 29 percent in Q3 2005 and 31 percent in Q1. The average size of the largest deals rose 18 percent to $668 million from $564 million last year.
Unlike the past few quarters when IPO activity was fairly evenly distributed across many industry sectors, 40 percent of third quarter IPO activity was in financial services, followed by health care with 18 percent and business services and technology with 11 percent each.
- Financial services led this quarter with five of the top ten deals. IPO proceeds in the sector doubled, from $1.6 billion in last year's third quarter to $3.2 billion this year, while the number of deals moved up slightly from 12 to 15. This represents an even bigger jump from last quarter when the sector raised only $1.1 billion in IPO proceeds.
IShares was the largest in the sector raising nearly $700 million. Two insurance IPOs raised $759 million, up from $211 million raised in Q3 2005 and $289 million last quarter. REITS came back into play with two deals worth $717 million, compared with only one $60 million deal during the first half of the year and $344 million worth of IPOs during Q3 2005. And special purpose acquisition companies (business combination offerings on the AMEX) continued to be a major presence in the sector, raising $612 million on the AMEX.
- Health care deals get bigger. After several quarters of smaller deals, health care posted its strongest quarter in a year, largely because of the Warner Chilcott's $1.1 billion IPO, the biggest IPO of the quarter. Proceeds in the sector totaled $1.5 billion, up from $656 million last year, and $369 million last quarter.
- NYSE's share of IPOs rises steadily as NASDAQ continues to decline. Thirty-six percent of third quarter IPOs listed on the NYSE, 51 percent on NASDAQ, and 13 percent on AMEX, compared with 28, 67 and 5 percent respectively last year, and 25, 61 and 14 percent, respectively, last quarter. Deal size on the NASDAQ and AMEX is up sharply this year compared with last, while remaining fairly constant on the NYSE. Average deal size this quarter was $304 million on the NYSE, $154 million on NASDAQ, and $127 million on AMEX, compared with $293 million, $93 million, and $17 million last year.
- Private equity-sponsored IPOs decline. Twenty-one percent of third quarter IPOs had private equity sponsors, down from 37 percent last quarter, while private equity's share of proceeds fell from 47 to 38 percent. Private equity sponsored three of the ten biggest deals this quarter compared with eight in Q2.
- Foreign registrants begin returning to US market. Foreign registrants raised $1.9 billion on US exchanges in the third quarter or 24 percent of proceeds, up from 10 percent in the same quarter of the last two years. Year-to-date, foreign registrants raised nearly $6.4 billion on US capital markets compared with $1.8 billion last year.
- Big deals help London outpace New York: IPOs on European exchanges raised $15.1 (€11.8) billion, up from $10.3 (€8.5) billion during Q3 2005, but down significantly from $24.4 (€19.4) billion raised during this year's second quarter. While volume is off sharply from the 187 deals reported in Q2 2006, it held constant year over year, with 126 Q3 deals this year, compared with 125 in 2005.
London has reemerged as Europe's premier IPO market, accounting for 44 percent of volume and 81 percent of value this quarter. However, two large deals on London's Main Market—Rosneft, the Russian oil and gas conglomerate, at $6.6 billion (€5.2) and Standard Life at $4.1 billion (€3.2)—skewed the results, accounting for 89 percent of the value raised. Excluding these deals, average IPO size was $26 million in London and $36 million on all European exchanges. Non-European companies accounted for 57 percent of London's proceeds and 27 percent of volume.
Gehsmann cautions that one down quarter is no cause for alarm. "The US public markets remain a desirable place to raise capital. The increase in foreign listings and continued activity by private equity firms are positive signs that the markets will continue to see stable IPO activity. We remain confident that 2006 will end up being a solid year for IPOs."
U.S. IPO Watch is a quarterly survey of all IPOs listed on U.S. 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 April 1, 2006 and June 30, 2006. Visit our website,
www.pwc.com/ustransactionservices, for our 2004 and 2005 U.S. IPO Watch reports.
The Global Capital Markets Group (GCMG) of PricewaterhouseCoopers advises a wide range of U.S. and non-U.S. companies on entering the U.S. and overseas capital markets. Our worldwide network of transaction specialists supply U.S. and non-U.S. corporations and private equity firms with transaction support, project management services, assistance in resolving technical accounting issues, and advisory support and guidance on the S.E.C. registration process. The Global Capital Markets Group is part of PwC's Transaction Services practice, which offers dedicated deal teams operating from 16 U.S. cities and some 90 locations in North America, Latin America, Europe and Asia. For more information on IPOs or GCMG services, contact Scott Gehsmann at (646) 471-8310, Howard Friedman at (646) 471-5853 or Jason Waldie at (646) 471-4149.
About PricewaterhouseCoopers
PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
# # #
Additional media contact:
Jenna Focarino
Brainerd Communicators for PricewaterhouseCoopers
Tel: (212) 739-6741
