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Aug 05

IPO market continues to improve

Posted by SherylNash01 in IPO pipelineIPOcareer/management


The IPO market continues to rebound. A total of 10 companies went public in July following 12 the prior month.

Altogether, there have been 74 IPOs, year-to-date, through July, up nearly 370 percent from the prior year, according to Greenwich, Ct.-based IPO research firm Renaissance Capital.

Granted, the year-to-date total is still well below the peak of 262 IPOs that went public in the first seven months in 2000 during the height of the dot-com boom, according to Renaissance Capital.

Meanwhile, the number of companies registering to go public surged in the second quarter, to 113 seeking $25.3 billion from 80 in the prior three-month period, according to Ernst & Young LLP.

Altogether, there are currently 127 companies in the active pipeline seeking to raise at least $30 billion, according to Renaissance. And that does not include the anticipated IPO of General Motors, which could become the biggest IPO ever.

The rebound in IPOs is not a big surprise. Typically, issuance more or less follows the overall equity markets. "The resurgence of pipeline activity represents optimism about the growth of the economy and the markets," says Maria Pinelli, Americas Director, Strategic Growth Markets, Ernst & Young, in a press release. "Renewed interest from foreign growth companies, including Chinese companies, also demonstrates the attractiveness of US markets globally."

The largest registrant this year is health care provider HCA, which filed to go public in early May and expects to raise $4.6 billion in gross proceeds in its IPO. So far, it has not yet set a pricing date.

Otherwise, nearly 60 of the registrants are seeking $100 million or less.

IPO aspirants, however, don't always get the kind of money they were initially seeking. So far this year (through July), the average IPO has been priced at 11 percent below the initial mid-point of the price range they were seeking, according to Renaissance.

One way to measure the performance of the IPO market is to compare the returns of Renaissance Capital's IPO Index with other equity benchmarks like the S&P 500. So far this year, the FTSE Renaissance IPO Composite Index is up 1.4 percent, slightly better than the S&P 500, up 1.1 percent year-to-date.

However, not every company that registers will go through with an IPO. If the stock market sours, they may shelve or postpone their plans. Others may be using the registration process to possibly smoke out private investors or even acquirers. Says Jackie Kelley, Americas IPO Leader at Ernst & Young: "When a company exposes itself in the process of going public, the spotlight can get the attention of potential buyers."



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