Big Deals (November 19)

Ups and downs in IPO market, private equity beats public markets in first half, more.

By Marine Cole

General Motors’ successful $22.7 billion IPO on Thursday—including $4.6 billion in convertible preferred stock--raised hopes that it would accelerate the recovery of the initial public offering market.

However, some of the optimism abated when Harrah’s Entertainment said is postponed its IPO due to market conditions.

The casino operator, which did not provide more information in a brief, terse press release, had hoped to raise $531 million in its offering, which was expected to be priced on Thursday and begin trading on the Nasdaq sometime this week, according to reports.

Even so, the IPO market has shown signs of renewed life, albeit from a comatose state. Year-to-date total proceeds from IPOs have reached $253.8 billion, up 107 percent from full year 2009 and 148 percent from 2008, according to Thomson Reuters.

China remains the top issuer for IPOs though in 2010, with total proceeds of $87.7 billion, accounting for 37 percent of total issuance. US IPOs total $30.7 billion, an 83 percent increase over full year 2009.

Other large IPOs this year included Hong Kong’s American International Assurance Group, which raised $20.5 billion in October and Japan's Dai-Ichi Mutual Life Insurance, which raised $11.2 billion in March.

Elsewhere, Cambridge Associates reported that private equity funds returned 1.6 percent in the second quarter, down from 4.4 percent in the first quarter, while venture capital funds earned 0.4 percent, down from 0.7 percent in the first quarter. These returns beat those of the major public market indices, which suffered their first negative quarter in a year, according to the research firm.

For the first half of the year, the private equity index returned 5.8 percent and the venture capital index returned 1 percent, while the DJIA and NASDAQ lost 5 percent and 7 percent respectively over the same period.

Cambridge said the software sector was the top performer, while energy was the only sector generating a negative return.

“It was encouraging to see such a meaningful increase in private equity distributions along with the breadth of positive returns among the key sectors in our PE benchmark index,” said Andrea Auerbach, managing director and head of U.S. private equity research at Cambridge Associates, in a press release this week. “There has also been an increase in the volume of capital calls, reflecting the market’s continued return to a more transactional state, further buoyed by the increase availability of leverage.”

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