Global Market Volatility Slows U.S. IPO Market, According to PwC's Deals Practice
NEW YORK, Oct. 6, 2015 /PRNewswire/ -- U.S. IPO activity decreased in the third quarter of 2015, as market volatility increased and investors paused to evaluate the impact of slowing growth in China and other markets, among other global macro-economic and geopolitical concerns. There were a total of 45 IPOs that raised $7.3 billion in the third quarter of 2015, according to IPO Watch, a quarterly survey by PwC US. Total third quarter IPO volume and proceeds were 40 percent down from second quarter's levels, but were on-par with the activity of Q1 2015.
On a year-over-year comparative basis, third quarter 2015 IPO volume was down 34 percent, and proceeds were down 81 percent, due in no small part to the third quarter of 2014's near record $38.1 billion raise, which included the Alibaba mega IPO. Beyond the 161 IPOs this year, overall broader equity and debt markets activity in the U.S. also slowed dramatically in the third quarter as investors remained cautious in the face of global macro-economic uncertainty, combined with the traditional summer slowdown.
Click here to view: Value and volume of IPOs by quarter
"The surge in market volatility - principally due to concerns about China's growth and the downturn in the Shanghai exchange which led to a negative effect on global financial markets - had a major impact on financing activity in the U.S.," said Neil Dhar, Partner, U.S. Capital Markets Leader, PwC's Deals Practice. "Against the backdrop of an uncertain global macro-economic environment, investors remained cautious on new issuers overall, while continuing to favor select high-growth companies, as reflected in healthy demand for biotech and biopharma IPOs. We expect financing activity, both equity and debt, to continue to stabilize in the near future, as investors tap ample liquidity to pursue growth opportunities in a modestly growing domestic economy and low-yield environment."
Continuing a recent trend, the healthcare industry continued to lead IPO market activity, in line with recent quarters, accounting for 42 percent of total volume with 19 IPOs. The financial sector led offering value, raising $2.5 billion in proceeds. Technology, a historically strong player in the IPO market, saw only two IPOs in the third quarter as high private valuations and increased later stage funding has made it possible for technology companies to fund operations without going public.
Click here to view: Value, volume and proceeds of U.S. IPOs by industry
"Increased market volatility had a real impact on IPO pricing dynamics during the third quarter," said Derek Thomson, U.S. Capital Markets Research Leader, PwC's Deals Practice. "With 16 percent of IPOs downsizing their debuts, we are seeing the pendulum swing back to buyers. As the market settles, we believe this will prove beneficial to the IPO market as investors regain comfort with valuations and lend support to the most promising new issuers."
Financial sponsors and venture capital companies remained active in the third quarter of 2015, backing slightly more than 45 percent of IPO volume and value. A very active venture capital market continued to drive private valuations and was prolific in the biotech IPO sector.
Click here to view: Value and volume of Financial Sponsor-backed U.S. IPOs
For the first time since the third quarter of 2011, returns to IPO investors were negative, closing the quarter down five percent. However, IPO returns continue to outperform the market with the S&P closing down seven percent for the quarter. The highest IPO to quarter-end returns came from the healthcare and financial industries. The average first-day gain of the 45 IPOs that priced during the third quarter was 15 percent.
Also reflecting cautious investor demand, there were 139 U.S. follow-on offerings in the third quarter raising a total of $28.8 billion, which represented a decrease of 30 percent in volume and 45 percent in value from the previous quarter. Of the follow-on offerings in the third quarter, 25 percent were backed by financial sponsors looking to systematically exit portfolio investments.
Alongside the slide in IPO activity, investors also were more cautious in the high-yield debt markets, with only 61 high-yield debt issuances raising $39.8 billion, which represents a significant 60 percent decrease over the second quarter, and a 55 percent decrease compared to the same period last year. Of the high-yield deals completed, merger and acquisition financing accounted for the majority of the issuances, although over a third of the issuances were companies refinancing ahead of a contemplated Fed rate increase in 2015.
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, filings with the FDIC, and bank demutualizations. IPOs do not include unit investment trusts, best efforts, commodity trusts and fully classified closed-end funds. Visit our website, www.pwc.com/us/ipo, for the annual 2014 US IPO Watch and information about PwC's IPO Services.
PwC helps corporate and financial sponsors achieve their growth initiatives from deal strategy through value capture. PwC's Deals professionals support clients on a wide range of transactions including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, as well as bankruptcies and other types of business reorganizations.
For more information, visit: www.pwc.com/us/deals
About PwC US
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms, which has firms in 157 countries with more than 195,000 people. We're committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com/US.
© 2015 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
Logo - http://photos.prnewswire.com/prnh/20100917/NY66894LOGO
SOURCE PwC US
Related Links
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article