2008 IPO Report - Initial Public Offerings
2008 IPO Report - Initial Public Offerings 2008 IPO Report - Initial Public Offerings
US IPO Market Review and Outlookfrom $9.9 billion (25% of the total)to $14.7 billion (32% of the total).Percentage of Profitable IPO Companies – 1998 to 2007%Venture-backed IPOs jumped from 56in 2006 to 75 in 2007, representing halfof all offerings by US-based issuers, andtheir gross proceeds doubled from $3.70billion to $7.40 billion. On the otherhand, IPOs by private equity–backedcompanies slumped in 2007.5626 2652616559626462The percentage of profitable companiesgoing public decreased from 64% in 2006to 62% in 2007, mirroring the average forthe prior five years, and in sharp contrastto the 26% in both 1999 and 2000. Themedian annual revenue of IPO companiesdecreased from $111.1 million to $87.0million, primarily due to an increase insmaller tech‐related companies. When theIPO market was its most selective, between2001 and 2003, the median annual revenueof IPO companies averaged $168.5 million.19981999Source: IPO Vital Signs20002001200220032004200520062007Although the capital markets shed someof their gains during the fourth quarter,the Dow gained 6.4% in 2007 and Nasdaqended the year up 9.8%. The average2007 IPO ended the year 14.8% aboveits offer price—well below the 24.4%return in 2006. The average first day gain,moreover, was 14.3%, leaving aftermarketperformance essentially flat.Median Annual Revenue of IPO Companies – 1998 to 2007$ millions267.5At year-end, 55% of 2007 IPOs weretrading at or above their offering price,compared to 70% in 2006. In 2007, 40deals were up more than 50% at year-endand 14 had doubled in price—almostexactly equal to the comparable numbersin 2006. Five of the ten best-performingIPOs of 2007 were by Chinese issuers,led by solar cell manufacturer JA SolarHoldings, which ended the year 365%above its IPO price. Rounding out the topthree were Argentina’s Mercadolibre,which hosts the largest online tradingplatform in Latin America (up 311%),and Chinese photovoltaic producer YingliGreen Energy (up 252%).No company saw its stock price doubleon opening day, but athenahealth—whichprovides Internet-based business servicesfor physician practices—came close(up 97%). An additional 18 companiessaw their stock price increase at least 50%on the first day of trading.35.01998Source: IPO Vital Signs17.9 17.619992000161.02001The best-performing IPO sectorsof 2007 were energy-related, with 35 IPOsgaining an average of 33% by year-end,and software, with 20 IPOs increasing26% on average by year-end.California maintained its dominantposition atop the IPO state rankingswith 44 offerings, followed byMassachusetts, which experienceda resurgent tech IPO market, with 20.Texas enjoyed a steady flow of energyrelatedIPOs, with 18, while New Yorkproduced seven IPOs, and Oklahomaand New Jersey generated six each.2002144.5200385.72004105.9 111.12005State Rankings – 2000 to 2007California 347Texas 95Massachusetts 89New York 88Illinois 452006In 2007, 68 IPOs (33% of the total)were completed by companies basedin the eastern United States (east of theMississippi River), while western US–basedissuers accounted for 83 IPOs (40%), andforeign issuers accounted for the remaining58 IPOs (28%). Eastern US IPOs raised87.02007
US IPO Market Review and Outlook$15.6 billion (33% of the total), westernUS IPOs raised $16.8 billion (35%) andforeign issuer IPOs raised $15.3 billion(32%) of the year’s IPO proceeds.The percentage of IPO companies listingon Nasdaq—the preferred listing choicefor many venture-backed and technologycompanies—edged down from 65%in 2006 to 62% in 2007, while the NYSE’smarket share increased from 31% to 36%.Average IPO offering size for companieslisting on Nasdaq increased from $124.7million in 2006 to $126.6 million in 2007,while the average IPO offering size forcompanies listing on the NYSE climbedfrom $387.4 million to $400.3 million.Median IPO Offering Size – 1996 to 2007$ millions30.0199633.01997Source: SEC filings36.0199861.0199984.02000115.5 116.420012002119.0200390.72004102.62005113.02006119.420072008 OutlookIn broad terms, the US IPOmarket of the past 15 years or sohas gone through four phases:■1991 to 1998—Reasonably stablemarket, producing an averageof more than 550 IPOs per yearVenture Capital–Backed IPOs – 1996 to 2007■1999 and 2000—Go-go marketcharacterized by many unqualifiedIPO companies and rampant priceeuphoria (although annual dealvolume was about 15% lower thanin the preceding eight years)216# of deals Median amount raised prior to IPO (in $ millions)25220146.9 47.8 49.060.273.252.058.066.0■2001 to mid-2003—Very selectivemarket, in which deal volume fellto historic lows and IPO candidateswere held to much higher standards15.012013.06822.431.322 18 2367435675■Mid-2003 through 2007—Solidmarket recovery, although notapproaching the deal volumes thatprevailed for most of the 1990sViewed through this lens, the IPOmarket of the late 1990s was as aberrantas the market that immediately followedit. We remain fundamentally optimisticabout the long-term prospects forthe IPO market, but 2008 is likely to bea challenging year for several reasons:■Capital Market Conditions: Stableand robust capital markets are a leadingindicator of IPO activity. In 2007,the Dow produced solid returns butfell short of its 2006 performance, duein part to a 4.5% decline in the fourth19961997Source: Dow Jones VentureOne1998199920002001quarter, which followed an all-time highin early October. Despite a modest dipin the fourth quarter, Nasdaq toppedits 2006 performance. The Dow shedanother 7.5% in the first quarter of 2008,while Nasdaq plummeted 14.1%. Manyobservers consider the markets’ prognosisfor the balance of the year to be mixed.■Economic Growth: Economic growthis a key determinant of strength inthe capital markets. After the technologyfueledboom sputtered to an end in early2001, economic recovery was largelydriven by strong consumer spending,boosted by low interest rates, tax cuts20022003200420052006and increased borrowing against homeequity as housing values soared. By late2007, however, the US economy beganto sour. Currently adverse economicfactors include record-high petroleumprices, rising food prices, the continuingdecline in the housing market, ongoingturmoil in the credit markets, thepersistence of some core inflation,and the expense of continuing overseasmilitary conflicts.Impact of Regulatory EnvironmentCorporate governance reformsin the United States have created new2007
- Page 1 and 2: 2008 IPO ReportAttorney Advertising
- Page 3: US IPO Market Review and Outlook200
- Page 7 and 8: Law Firm and Underwriter RankingsEa
- Page 9 and 10: Regional IPO Market Review and Outl
- Page 11 and 12: Counsel of Choice for Public Offeri
- Page 13 and 14: New SEC Rules Offer Some Relief to
- Page 15 and 16: IPOs by Special Purpose Acquisition
- Page 17 and 18: PIPEs and Rule 144A Market Review a
- Page 19 and 20: Recent Developments in the Proxy En
- Page 21 and 22: Want to know moreabout the venture
US <strong>IPO</strong> Market Review and Outlook$15.6 billion (33% of the total), westernUS <strong>IPO</strong>s raised $16.8 billion (35%) andforeign issuer <strong>IPO</strong>s raised $15.3 billion(32%) of the year’s <strong>IPO</strong> proceeds.The percentage of <strong>IPO</strong> companies listingon Nasdaq—the preferred listing choicefor many venture-backed and technologycompanies—edged down from 65%in 2006 to 62% in 2007, while the NYSE’smarket share increased from 31% to 36%.Average <strong>IPO</strong> offering size for companieslisting on Nasdaq increased from $124.7million in 2006 to $126.6 million in 2007,while the average <strong>IPO</strong> offering size forcompanies listing on the NYSE climbedfrom $387.4 million to $400.3 million.Median <strong>IPO</strong> Offering Size – 1996 to 2007$ millions30.0199633.01997Source: SEC filings36.0199861.0199984.02000115.5 116.420012002119.0200390.72004102.62005113.02006119.42007<strong>2008</strong> OutlookIn broad terms, the US <strong>IPO</strong>market of the past 15 years or sohas gone through four phases:■1991 to 1998—Reasonably stablemarket, producing an averageof more than 550 <strong>IPO</strong>s per yearVenture Capital–Backed <strong>IPO</strong>s – 1996 to 2007■1999 and 2000—Go-go marketcharacterized by many unqualified<strong>IPO</strong> companies and rampant priceeuphoria (although annual dealvolume was about 15% lower thanin the preceding eight years)216# of deals Median amount raised prior to <strong>IPO</strong> (in $ millions)25220146.9 47.8 49.060.273.252.058.066.0■2001 to mid-2003—Very selectivemarket, in which deal volume fellto historic lows and <strong>IPO</strong> candidateswere held to much higher standards15.012013.06822.431.322 18 2367435675■Mid-2003 through 2007—Solidmarket recovery, although notapproaching the deal volumes thatprevailed for most of the 1990sViewed through this lens, the <strong>IPO</strong>market of the late 1990s was as aberrantas the market that immediately followedit. We remain fundamentally optimisticabout the long-term prospects forthe <strong>IPO</strong> market, but <strong>2008</strong> is likely to bea challenging year for several reasons:■Capital Market Conditions: Stableand robust capital markets are a leadingindicator of <strong>IPO</strong> activity. In 2007,the Dow produced solid returns butfell short of its 2006 performance, duein part to a 4.5% decline in the fourth19961997Source: Dow Jones VentureOne1998199920002001quarter, which followed an all-time highin early October. Despite a modest dipin the fourth quarter, Nasdaq toppedits 2006 performance. The Dow shedanother 7.5% in the first quarter of <strong>2008</strong>,while Nasdaq plummeted 14.1%. Manyobservers consider the markets’ prognosisfor the balance of the year to be mixed.■Economic Growth: Economic growthis a key determinant of strength inthe capital markets. After the technologyfueledboom sputtered to an end in early2001, economic recovery was largelydriven by strong consumer spending,boosted by low interest rates, tax cuts20022003200420052006and increased borrowing against homeequity as housing values soared. By late2007, however, the US economy beganto sour. Currently adverse economicfactors include record-high petroleumprices, rising food prices, the continuingdecline in the housing market, ongoingturmoil in the credit markets, thepersistence of some core inflation,and the expense of continuing overseasmilitary conflicts.Impact of Regulatory EnvironmentCorporate governance reformsin the United States have created new2007
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