PwC IPO Watch Finds Q3 IPO Market Proceeds Raise $38.1 Billion

NEW YORK, Oct. 6, 2014 /PRNewswire/ -- The US IPO market continued to demonstrate significant investor interest in initial public offerings (IPOs) in the third quarter of 2014. While the volume of IPOs slightly declined, proceeds reached $38.1 billion, and the pace of companies entering the IPO registration process continued to exceed prior year levels, according to IPO Watch, a quarterly survey by PwC US of IPOs listed on U.S. stock exchanges.  Interest in new equity issues remains healthy heading into the fourth quarter, although investors have become more cautious as they evaluate various global macroeconomic and geopolitical issues.

According to PwC, there were 68 public company debuts in the third quarter of 2014, representing $38.1 billion in proceeds.  Third quarter volume remained relatively consistent with the 64 public listings in the third quarter of 2013, while total IPO value increased 221 percent over the $11.8 billion in total proceeds recorded in the same period.  For the first nine months of the year, there were a total of 228 IPOs, generating $70.5 billion in proceeds, compared to 161 IPOs, which raised $32.8 billion during the same period of the previous year.  The substantial gain in total proceeds raised during the third quarter and first nine months of 2014 reflects the inclusion of the Alibaba Group Holding IPO, which raised $21.8 billion on September 19, 2014, not including the overallotment exercise - with overallotment the IPO raised $25 billion, the largest IPO on record.

Value and Volume of U.S. IPOs by Quarter

"We continued to see healthy capital markets activity during the third quarter, with ample funding alternatives available from IPOs to debt financings," said Henri Leveque, leader of PwC's U.S. Capital Markets and Accounting Advisory Services. "While investors continue to pursue high growth opportunities, particularly in the technology and healthcare sectors, they are returning to a more selective approach to new offerings.  Ongoing global geopolitical concerns and continued uncertainty regarding the direction of the worldwide economy have all fuelled a more cautious stance in the equity markets.  Still, the IPO market remains very active as companies seek to tap into investor appetite while the window is open," Leveque added.

In line with previous quarters, healthcare continued to dominate the market in terms of total IPO volume, accounting for 46 percent of total IPO volume for the quarter.  However, healthcare IPOs only raised a total of $2.8 billion, or seven percent of total IPO proceeds, illustrating that these IPOs typically raise smaller levels of investment. On a total proceeds basis, the top industry was technology with $23.5 billion in proceeds, including the Alibaba IPO, followed by financial services with $7.8 billion.  Overall, IPO investors remain interested in high-growth companies as reflected in the strong demand for biotech and technology IPOs. 

Value and Volume of U.S. IPOs by Industry

The average first day gain of the 68 IPOs that priced during the third quarter was 11.4 percent, a decrease from the 20 percent first day gain for the IPOs that priced in the third quarter of 2013.  However, the performance was up from the 9.2 percent first day gain of IPOs that priced during the second quarter of 2014.  In addition, third quarter IPOs saw strong aftermarket performance, returning 18.6 percent between the IPO and close of the quarter, easily outperforming the S&P 500.

Financial sponsors maintained their presence in the public markets during the third quarter of 2014, backing 54 percent of IPO volume and 69 percent of value, compared to 63 percent of IPO volume and 51 percent of value in the third quarter of 2013. 

Q3 saw a marked decrease in high yield issuance of 52% to $68.9 billion, driven by a significant reduction in refinancing, while the number of high yield issuances driven by M&A increased 26% over Q2. The YTD total of $250 billion falls slightly short of the 2013 YTD total of $263 billion, and increasing softness in the secondary markets are creating headwinds.

Value and Volume of Sponsor-backed U.S. IPOs

"With the gradual reduction in the Federal Reserve's stimulus program, and the prospect of increased interest rates on the horizon, we're continuing to see significant refinancing activity, as management teams seek to secure funding on attractive terms," said Mike Gould, PwC's U.S. Public Offerings Leader.  "At the same time, IPOs and high yield debt securities remain attractive to investors as they seek to lock in yield."

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, best-efforts, filings with the FDIC, and bank demutualization's.  IPOs do not include unit investment trusts, commodity trusts and fully classified closed-end funds.  Visit our website, www.pwc.com/us/ipo, for the annual 2013 US IPO Watch and information about PwC's IPO Services.

PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution.  We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual.  Our local and global deal strength is derived from our deal professionals in 35 cities in the U.S. and across a global network of firms, including Strategy &, which spans 75 countries. The result is deals capabilities that include a unique combination of front-end strategy and deal origination, diligence, and post-deal value capture. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S.  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 in 157 countries with more than 184,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day

Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.

© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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SOURCE PwC US

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