PwC US Says IPO Market Recovers from Summer Doldrums

The Second Largest U.S. IPO of 2012, Strong Equities Markets, Healthy Number of Companies Entering Registration Creates Optimism for U.S. IPO Market

NEW YORK – October 2, 2012 – Despite a marked moderation in mid-quarter IPO activity, the continued strength in the equities markets, a healthy registration pipeline, a decrease in market volatility and the second largest U.S. IPO of 2012 are all expected to support increased IPO momentum into the fourth quarter, according to IPO Watch, a quarterly and annual survey of IPOs listed on U.S. stock exchanges by PwC US. The quarter finished strongly with eight IPOs pricing in the last two weeks of September, including the quarter’s largest IPO of Banco Santander's Mexican unit dual listing $4 billion IPO on September 25, which raised $2.9 billion in the U.S. markets.

There were 29 U.S. IPOs in the third quarter of 2012, compared to 31 IPOs in the second quarter of 2012, and 21 IPOs in the third quarter of 2011. Total proceeds raised in the third quarter were $6.6 billion, compared to $21.8 billion in the second quarter of 2012 (which included the $16 billion Facebook IPO), and $3.2 billion in the third quarter of 2011. During the third quarter of 2012, the financial and the technology sectors, which had eight IPOs each, were the leading sectors with 58 percent and 13 percent of the proceeds, respectively. Financial sponsors continued their history of strong presence in the IPO market, backing 69 percent of IPOs in the third quarter of 2012, generating 43 percent of total proceeds.

On a year-to-date basis, 104 companies have completed their IPOs, raising total proceeds of $34.1 billion, compared with 106 companies that had completed their IPOs in the first three quarters of 2011 raising $29.1 billion.

“The IPO market continued to demonstrate discrete periods of activity in the third quarter, reflecting the continued compression of IPO windows of opportunity,” said Henri Leveque, leader of PwC’s U.S. Capital Markets and Accounting Advisory Services.  “The markets started well in July, became fairly muted in August, and showed a substantial pickup in activity in September to close out the quarter. As volatility decreased and the equity markets climbed to levels not seen since 2007, we’ve seen well-prepared companies able to execute on their IPO plans."

IPOs continued to outperform as a sector in the third quarter, with stock price gains handily exceeding the broader equity markets returns. On a quarter-to-date basis, all 29 IPOs are, on average, 26 percent above their issue price, again strongly outperforming the S&P500 which showed a third quarter gain of approximately 5.8 percent. Also, all 29 IPOs, when combined, increased their price by an average of 10 percent on their first day of trading and averaged a return of 13 percent after one week.

During the third quarter of 2012, 38 companies entered the SEC public IPO registration process, exceeding the 32 companies that filed in the second quarter of 2012.   The LTM (last twelve months) SEC IPO pipeline had 95 companies seeking to raise $19 billion. The pipeline was led by the financial and energy sectors, followed closely by the technology and consumer sectors.  Combined, they accounted for 55 percent of the total proceeds being sought. According to PwC, the actual pipeline is likely to be higher due to the Confidential Filing provisions provided by the JOBS Act - Emerging Growth Companies (EGC's) are only required to publicly disclose their filings within 21 days of their anticipated IPO roadshow.

Looking at the global markets, Europe saw a strong end to the quarter, with the London Main Market IPO of Sberbank, the largest commercial bank in Russia, raising $5.2 billion through its offering of ordinary shares and global depository shares (GDSs). The outlook across Europe is promising, with traditional IPO indicators continuing to improve and a number of high-profile companies signalling their intention to float in the final quarter.

Meanwhile, in Asia, IPO activity is substantially down especially for Hong Kong which had been the number one market for IPOs three years in a row. Malaysia and Japan were more active with individual transactions going to market with competitive valuations or government support, including the Japan Airlines $8.5 billion IPO in September which was the second largest IPO of the year globally. Activity is expected to pick up somewhat mildly driven by liquidity.

PwC recently released a report titled Considering an IPO? The Costs of Going and Being Public May Surprise You,” detailing the traps, pitfalls and best practices in understanding and managing costs of an IPO and being a public company. According to the report, 48 percent of surveyed CFOs with firms that went public in the U.S. in the past several years said the one-time costs associated with their IPOs had exceeded their expectations. The report includes recommendations for preparing a detailed analysis of the costs, which will accelerate the budgeting process and make it more accurate, limit surprises throughout the IPO process and provide organizations adequate time to develop the infrastructure that will support the rigors and requirements of life as a public company.

 

PwC US IPO Watch is a quarterly and annual survey of IPOs listed on U.S. stock exchanges.  These include IPOs by domestic and foreign companies, best-efforts, business development companies, filings with the FDIC, and bank demutualization’s.  IPOs do not include unit investment trusts, commodity trusts and fully classified closed-end funds.  Visit our website, www.pwc.com/us/ipo, for the annual 2011 US IPO Watch and information about PwC's IPO Services.

 

PwC’s Deals practitioners help corporate and private equity executives navigate transactions to maximize value and returns. In today's increasingly daunting economic and regulatory environment, experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. First, we help clients with strategic planning around their growth and investment agendas and then advise on the business-wide risks and value drivers in their transactions for more empowered negotiations, decision making and execution. Clients can then expedite their deals, minimize their risks, capture and deliver value to their stakeholders, and quickly return to business as usual.

Our local and global deal strength is derived from over 1,400 deal professionals in 21 cities in the U.S. and over 9,800 deal professionals across a global network of firms in 75 countries.  In addition, our network firm PwC Corporate Finance can provide investment banking services within the U.S.

For more information about M&A and related PwC services, please visit: www.pwc.com/us/deals

 

About the PwC Network
PwC firms help organizations and individuals create the value they’re looking for.  We’re a network of firms in 158 countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services.  Tell us what matters to you and find out more by visiting us at www.pwc.com.  

Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.

© 2012 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

# # #

 

Maggie Nolan / Katie Prue
Brainerd Communicators, Inc.
(212) 986-6667
nolan@braincomm.com
prue@braincomm.com