The U.S. IPO market heated up just in time for summer, according to recent data. The surge in US IPOs corresponded to the record highs in U.S. stock market indices during the second quarter.
The quarter ended with a brief but significant market correction, responding significantly to the reminder from Chairman Bernanke that there will eventually be an end to the Fed’s quantitative easing. However, the expectation remains for a continuation of the increased flow of IPOs that took place during the first half. In the first four months of the year alone, there was a total of 33 IPOs in the US (excluding IPOs by REITs, SPACs and unit offerings). Moreover, 23 IPOs were declared effective by the SEC in the month of May alone, raising more than $4.7 billion. For the five-month period ended May 31, 2013, there were 56 IPOs, raising more than $13.5 billion.
Ernst & Young also reports that the first quarter of 2013 was profitable for IPOs. The quarter featured 24 effective IPOs having an average of 12.7 percent return on the first day of trading compared with the 9.96 percent YTD total return for the S&P 500 index.
“There have already been far more IPOs than we anticipated in 2013. I think we are finally seeing a level of confidence return to the markets after a tumultuous few months following the U.S election and the fiscal cliff,” said Herb Engert, Strategic Growth Markets Practice Leader for Ernst & Young LLP.
High investor confidence is certainly good news for companies preparing an IPO. Expectations are for a continuing expansion of IPO flow in the 3rd and the 4th quarters. However, the ultimate success of an offering still relies heavily on the fundamentals of the company, including a proven management team and a solid business plan. IPO’s that were priced before the recent market correction are being re-priced; there are a number of leveraged buyouts and subsidiaries of larger companies that will be returning to the public markets. For companies large and small, attractive pricing can heavily influence whether a company sinks or swims in the open market.
If you have any questions about the latest IPO trends or would like to discuss how they may impact your business venture, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.
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