NEW YORK, October 30, 2008 - The number of initial public offerings (IPOs) in the United States (US) has declined for three straight quarters as volatility in the US economy continues unabated. For the first nine months of 2008, there were 54 IPOs that raised $31.2 billion, a significant drop from the 195 offerings that generated $44.7 billion for the same period in 2007. When the $17.8 billion VISA IPO is excluded from the 2008 results, IPO value for the first nine months was just $13.3 billion.
The third quarter of 2008 produced 12 offerings raising $1.9 billion. It was the slowest quarter since the second quarter of 2003, when five IPOs raised $1.6 billion. Comparing the third quarter performance to other third quarter results, IPO activity for the third quarter of 2008 was the most sluggish since 2002.
"The crisis in the credit markets and prolonged volatility in the equity markets are deterring companies from pursuing IPOs. Issuers will continue to defer equity offerings until some stability is restored and investors regain confidence in the US financial system," said Scott Gehsmann, a capital markets partner in PricewaterhouseCoopers' Transaction Services Group.
As of October 7th, 2008, 73 planned IPOs were either postponed or withdrawn compared to 16 for the same period in 2007 (Renaissance Capital's IPOHome.com). Not only US companies were postponing or withdrawing their IPOs, non-US issuers were also shying away from the US market. There were only five IPOs by non-US issuers in the third quarter of 2008 compared to 11 in the same period in 2007. For the first nine months of 2008, IPO volume and proceeds raised by non-US issuers decreased 54 percent and 83 percent, respectively, to 16 offerings and $2.1 billion. China continued to be the domicile of most non-US issuers with seven of the 16 offerings.
2007 witnessed a flood of financial sponsored-backed IPOs. Fast forward to 2008, that flood was reduced to a drip. During the third quarter of 2008, there were five financial sponsored-backed IPOs raising $1.1 billion, whereas 25 such IPOs raised approximately $4.4 billion for the same period last year. Collectively, there were 17 financial sponsored-backed IPOs generating $3.0 billion for the three quarters in 2008. This was a significant drop in activity compared to 2007 when 104 financial sponsored-backed IPOs raised a total of $19.3 billion for the first nine months of 2007.
"Financial sponsors are holding on to their portfolios, waiting for a more stable environment to harvest returns. Financial sponsored-backed IPOs will return when the extreme market volatility subsides and valuations stabilize," said Gehsmann.
Special purpose acquisition company (SPAC) IPOs that gained popularity in 2007, nearly dried up in 2008. There were two SPAC offerings in the third quarter of 2008, bringing the nine month total to 11 SPAC IPOs generating $3.4 billion. For the same period in 2007, there were 27 SPAC IPOs raising $3.9 billion.
"While some backlog of deals exists, the prolonged credit turmoil and the impact on the equity markets are discouraging good companies with sound business models from accessing the US capital markets. Investors, uncertain where the current market may lead, are holding onto cash," said Gehsmann. "As IPO volume continues on a downward spiral, we anticipate that the number of IPOs in 2008 will be lowest in the last five years.
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, 2008 and September 30, 2008. Visit our website, www.pwc.com/ustransactionservices , for our 2004, 2005, 2006, 2007 and 2008 US IPO Watch reports.
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