After Strong Start to 2012, IPO Market Sees Pullback, PwC Says

June Slowdown in Pricings Leads to 39 Percent Decline in Second Quarter IPO Volume

Renewed Optimism for Stronger Second Half of IPO Activity 

NEW YORK – June 27, 2012 –Following very healthy levels of IPO activity during the first five months of the year, the number of IPO pricings slowed in mid-May, according to PwC US.  Overall, the number of U.S. IPOs in the second quarter of 2012 declined to 27, from 44 in the first quarter.  The second quarter started strongly with 17 IPOs pricing in April, and ten IPOs pricing in May, but IPO activity stalled due to ongoing global macroeconomic concerns that have increased investor uncertainty and market volatility.  Consequently, no pricings have been completed in the U.S. since the Facebook IPO in mid-May.

Despite a slowdown in IPO pricings, the registration pipeline remains at high levels and there is optimism that pricing activity will return as some of these concerns are resolved, according to IPO Watch a quarterly and annual survey of IPOs listed on U.S. stock exchanges by PwC.

Year-to-date, 71 companies have completed IPOs raising total proceeds of $26.9 billion, compared with 85 companies that completed IPOs in the first half of 2011 raising $25.8 billion.  The slowdown in pricings in June led to a 39 percent decrease in volume compared with the first quarter of 2012, and a 48 percent decrease compared to volume in the second quarter of 2011.  Including the $16 billion in proceeds from the Facebook IPO, total IPO proceeds raised in the second quarter of 2012 amounted to $21.2 billion, 66 percent higher than the comparable period in 2011 and the third highest quarterly proceeds since 2007.

“The IPO market entered the second quarter with considerable momentum and with confidence levels supported by the high registration pipeline,” said Henri Leveque, leader of PwC’s U.S. Capital Markets and Accounting Advisory Services.  “However, pricing activity proved unsustainable as volatility increased along with renewed concerns over global uncertainty and other market dynamics. That said, as the markets are seeing increasingly compressed IPO windows of opportunity, our clients are now more than ever focused on readying themselves to be able to execute deals when, and not if, the windows re-open."

Excluding Facebook, second quarter IPOs raised total proceeds of $5.2 billion, at an average value of $200 million per IPO, representing an increase of 53 percent over the first quarter average IPO size of $131 million.  Total proceeds, excluding Facebook, were only 10 percent less than the first quarter of 2012, illustrating the strength of the IPO markets earlier in the quarter.  Continuing on the positive IPO pricing trends of the first quarter, IPOs in the second quarter produced an un-weighted average return of 8 percent since IPO date, which again exceeded the S&P500 quarterly loss of 6 percent.

Unresolved U.S. domestic, European and Chinese macroeconomic concerns have led to a broad decrease in U.S. investor confidence in the near term, as evidenced by a quarterly 11 percent increase in the VIX measure of market volatility.  Resolution of some of these issues may return some stability to the markets in the coming months.

Despite the slowdown in pricing activity, the IPO registration pipeline has remained at a high level.  During the second quarter of 2012, 29 companies filed for IPOs.  As of June 21, 2012, the number of companies that had publicly filed for an IPO in the last twelve months was 121 companies seeking to raise $23.7 billion. This represents a decrease from the 157 companies in the pipeline at the end of the first quarter, partly due to lower filings and the confidentiality filings provisions of the JOBS Act.   The pipeline by value is led by the financial services and REIT sectors, followed closely by the energy, technology and consumer sectors, and which combined account for 80 percent of the total proceeds.

“The solid registration pipeline remains a positive forw ard-looking indicator for the IPO market in 2012 and beyond given that historically the majority of companies that file will ultimately price their IPOs,” added Leveque.  “In addition, actual registrations may be higher than reported given the impact of the JOBS Act, which allows emerging growth companies to file confidentially with the SEC with the requirement that they publicly disclose their filings within 21 days of their anticipated IPO road shows.  There is a lot of interest around this new piece of legislation and while it’s too soon to predict its ultimate impact, we expect a number of companies to explore this new avenue as a vehicle to go public.”

Financial sponsors continued their history of strong presence in U.S. IPOs, backing 70 percent of IPOs in the second quarter of 2012 and generating 90 percent of total proceeds.  This high level of sponsor involvement remains consistent with the comparable quarter in 2011 which also saw two-thirds of the quarter’s IPOs backed by financial sponsors, representing 74 percent of proceeds.

Global market activity overall declined in the second quarter.  In Europe, after some early encouraging signs in the first quarter, IPO activity slowed dramatically in Q2 2012 with a 65 percent decline in volume and a 96 percent decline in proceeds from Q2 2011. Similarly, Asia showed a 40 percent decline in listing volume and a 76 percent decline in proceeds from the second quarter last year.

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.

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Maggie Nolan / Katie Prue
Brainerd Communicators, Inc.
(212) 986-6667
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