2013 IPO Survey: Fiscal Cliff Causes Uncertainty For 2013 IPO Outlook

ACCORDING TO KCSA STRATEGIC COMMUNICATIONS' ANNUAL SURVEY, LEADING IPO ATTORNEYS ANTICIPATE GREATER MARKET STABILITY AS OVERALL ECONOMY STRENGTHENS, AND AS OVER-HYPED SOCIAL MEDIA IPOS ARE NO LONGER IN THE PIPELINE

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KCSA Strategic Communications

Dec 27, 2012, 10:39 ET

NEW YORK, Dec. 27, 2012 /PRNewswire/ -- 2013 may finally be the turnaround year for the U.S. IPO market, according to a new survey of U.S. transaction attorneys conducted by KCSA Strategic Communications (www.kcsa.com), a leading integrated communications firm specializing in financial public relations, investor relations, social media and creative marketing services.

In its 3^rd Annual IPO Survey, KCSA conducted in-depth interviews with nearly 50 securities attorneys whose firms advised on 87 percent of the initial public offerings listed on major U.S. exchanges during 2012.

According to the results of the independent survey: for the first time since the survey has been conducted, more than 1/3 of respondents (35%) believe that the IPO market in the coming year will be stronger than the previous one. The remaining respondents think the IPO market in 2013 will be relatively flat when compared with 2012.

The perceived drivers for improvement include stabilization of the U.S. economy and moving beyond the fear of a 'fiscal cliff' (59%), resolution of the Eurozone crisis (12%) and increasing consumer confidence (5%).

According to Jeff Corbin, chief executive officer of KCSA Strategic Communications, "Since the end of the financial crisis that started in late 2007, there have been strong hands on the reigns of the U.S. capital markets, slowing down the IPO market. While there have been some big names that have gone public during the last few years – Facebook, Zynga and others in the social media space – the vast majority of those companies that could have, and should have, accessed the public markets, have had to wait for improving market conditions. Those conditions seem to be coalescing in 2013, which should make for a more active IPO market."

According to 66 percent of those surveyed, the social media bubble has burst. The attorneys almost unanimously agreed that Facebook was both the most anticipated and most over-hyped IPO of 2012. According to 89 percent, Facebook's IPO will cause valuations of social media companies to be lower.

When asked to reference the most anticipated IPO for 2013, 86 percent were not sure; this is in stark contrast to last year's survey in which 93 percent of respondents believed that Facebook was the most anticipated IPO of the coming year. The current sentiment is that there is no blockbuster IPO in the pipeline.

According to Alex Lynch, partner, Weil, Gotshal & Manges, "It's healthier for the IPO markets not to have one highly anticipated 'hot' listing that both overheats the market, causing a lot of volatility, as well as keeps investors, and, in turn, money, on the sidelines awaiting the big listing. Hopefully, not having one large 'hot' listing in 2013 will lead to a healthier and more stable overall IPO market."

The JOBS Act that was passed in 2012 has had a strong impact on pre-IPO companies, with 94 percent of the attorneys surveyed citing an increase in the number of confidential filings as a result of the Act. According to those surveyed, the advantages of filing confidentially include the ability to file without public scrutiny (48%), keep competitive information confidential (32%) and test the market's appetite (20%). Another impact of the JOBS Act on pre-IPO companies is that it provides companies an opportunity to pre-market the offering prior to filing with the SEC, according to 59 percent of those surveyed.

According to the survey, in 2013, it is likely that there will be strong demand for foreign companies to access U.S. capital markets and list on the major U.S. exchanges. When asked which foreign countries will provide the most issuances on the major U.S. Exchanges in 2013, respondents said China (38%), Israel (17%), The European Union (12%) and The United Kingdom (10%).

"Many foreign companies, especially in the technology space, still view the U.S. capital markets as the holy grail in terms of listing, both in terms of perception and valuation as well as liquidity. These types of foreign companies continue to believe that the U.S. capital markets are the only place where their value will be appropriately reflected," commented Michael Kaplan, partner, Davis Polk & Wardwell LLP.

A key finding of the survey was that enthusiasm for Chinese IPOs continues to decline. In 2012 and 2011, when respondents were asked which foreign countries would have the most issuances on major U.S. exchanges, 58 percent and 100 percent of respondents, respectively, named China.

"The fall-off is largely driven by a number of well-publicized incidents of China-based issuers experiencing significant corporate governance and accounting issues that have created negative perceptions generally about China-based issuers. However, listings of high quality China-based companies will likely continue in the future, as U.S. investors want to participate directly in China's economic growth," noted Colin Diamond, partner, White & Case LLP.

Private Equity backed companies are also expected to dominate the IPO landscape in 2013, as 68 percent of those surveyed think that the number of private equity backed IPOs will be greater when compared with 2012, which saw the highest number of private equity backed offering since 2007.

"The pipeline of private equity backed IPOs remains robust, and we anticipate seeing continued strong activity from this group of issuers," commented Joshua F. Bonnie, partner, Simpson Thatcher & Bartlett LLP.

When asked what industries will result in the most IPOs in 2013 respondents said: Technology (41%), Energy (24%), Healthcare (8%), Retail (6%), Real Estate (5%), Financial Services (6%) and Other (10%)

For more information about KCSA Strategic Communications or the 2013 IPO Outlook Survey, visit us at www.kcsa.com or contact Sharron Silvers, [email protected].

About KCSA Strategic Communications
KCSA is a fully-integrated communications agency specializing in public relations, investor relations and marketing with expertise in financial and professional services, technology, healthcare, media, energy and public services companies. Since 1969, the firm has demonstrated strategic thinking and program execution that drives results for its clients in the ever-changing communications and digital landscape. The firm's clients are its best references. For more information, please visit www.kcsa.com.