2009 IPO Report - WilmerHale

10 Regional IPO Market Review and OutlookCaliforniaCalifornia IPOs – 1996 to 2008California produced only five IPOs in2008, compared to 43 in 2007, but grossproceeds soared from $5.73 billion to$18.21 billion because of Visa’s recordsizedIPO in 2008. Without Visa’s $17.9billion IPO, however, proceeds fromCalifornia IPOs would have plummeted by94%. These results reflect the lowest levelof IPO activity in California in decades,mirroring national trends in 2008.# of deals1801066.844.51$ billions17.57169663.42131 12.9025 2.1515 1.56 181.376.275425 2.894.27355.7343518.21In addition to Visa, the other CaliforniaIPOs of 2008 were from healthcarecompanies CardioNet ($81.0 million)and IPC The Hospitalist Company($83.2 million); security and compliancemanagement solutions provider ArcSight($61.8 million); and energy recovery devicemaker Energy Recovery ($119.0 million).1996 1997Source: SEC filings19981999200020012002200320042005200620072008The average California IPO in 2008ended the year 8% above its offeringprice—boosted by strong aftermarketperformances by CardioNet and Visa—compared to the 36% average declineexperienced by all IPOs nationwide.The California IPO market historicallyhas been dominated by technologyrelatedcompanies, with tech IPOsroutinely accounting for 80% to 90%of the total number of the state’s offerings.This trend is likely to resume as IPOactivity returns to more normal levels.With capital market conditions improvingand signs of economic recovery appearing,we expect that California IPO activity willpick up in 2009. The second quarter of thisyear saw successful IPOs by BridgepointEducation ($98.2 million) and OpenTable($60.0 million). Additional emergingcompanies that demonstrate strong growthin revenue and profitability can alsobe expected to come to market this year.Mid-AtlanticThe mid-Atlantic region of Virginia,Maryland, North Carolina, Delawareand the District of Columbia producedjust a single IPO in 2008, comparedto 10 in 2007. Gross proceeds dippedfrom $1.25 billion to $0.34 billion.Mid-Atlantic IPOs – 1996 to 200845# of deals1.561996463.361997Source: SEC filings$ billions2.4022199826 2.631999The region’s sole IPO of 2008 was the$337.5 million offering of Colfax, asupplier of fluid handling products. Pricedat $18.00 per share in May, the stockwas pulled down 42% by year-end, onlymodestly worse than the overall declinein capital markets over this period.Technology-related companies historicallyhave contributed a significant portionof the mid-Atlantic region’s IPO deal flow.We expect this pattern to resume withimprovements in the IPO market in 2009.243.82200052.752001720020.96 0.9342003114.282004152.95200513 1.34 1.251020062007Rosetta Stone, a provider of technologybasedlanguage learning solutions,completed a $52.3 million IPO in April2009, and its stock appreciated 52%by the end of the second quarter.As conditions permit, the region’s IPOcandidates in the balance of the yearshould include information technologyand life sciences companies, as wellas software and wireless companies.10.342008