2009 IPO Report - WilmerHale

2 US IPO Market Review and Outlook2008 ReviewUS IPOs – 1996 to 2008Facing the combined burden of aneconomic recession and plunging capitalmarkets, the IPO market turned inits worst performance in a generation.In 2008, there were only 31 IPOs—thelowest annual total since 1975—withgross proceeds of $24.1 billion (of which$17.9 billion came from a single offering).The year’s tallies were down 85% in dealvolume and 48% in gross proceeds from2007, ending a run of four strong yearsthat had averaged about 200 IPOs annually.US issuers86698768619975221996 1997Foreign issuers53757353 480433101998 1999446107339200091 75 7114 9 1077 1466 9 61 102001 2002 2003205 190 198 20734 32 35 58171 158 163 1492004 2005 2006 2007319222008While 2008 was a down year acrossthe board, the second half of the year waseven slower than the first. The IPO marketvirtually dried up in the second half of theyear, producing a mere six offerings raisingjust $1.0 billion. As discussed furtherbelow, the market drought continued into2009, before beginning to show signs ofrecovery in the second quarter.Source: SEC filingsEconomic conditions soured throughout2008 in the face of ongoing turmoil inthe credit markets, the continuing declinein the housing market and a stiff dropin consumer confidence—and the capitalmarkets followed suit. The Dow JonesIndustrial Average experienced thethird-worst year in its history, droppingby 34%, and the Nasdaq Compositedeclined by 41%.Every segment of the IPO market sufferedin 2008. The number of offerings byUS-based issuers fell from 149 in 2007 to22 in 2008, the number of IPOs by foreignbasedissuers decreased from 58 to 9,and the number of offerings by technologyrelatedcompanies declined from 107 to 9.IPOs by venture capital and privateequity backers dropped precipitouslyin 2008. The number of IPOs by USVC-backed companies plummeted from76 to 7—the lowest annual count inmemory. Similarly, the number of USbuyout-backed IPOs fell from 46 to 7.Among the year’s few bright spots wasVisa’s mammoth $17.9 billion IPO—thelargest US-issuer IPO in history. Otherlarge IPOs in 2008 came from AmericanWater Works ($1.25 billion), IntrepidPotash ($960 million) and GT Solar ($500million). Safe Bulkers produced the largestUS IPO Dollar Volume – 1996 to 200848.810.038.81996US issuers Foreign issuers $ billions59.728.98.730.8 32.11997Source: SEC filings40.8199895.333.761.61999108.252.755.5200041.3foreign-based-issuer IPO of 2008, withgross proceeds of $190 million, althoughits price declined 65% for the year.Despite gaining 10% on its first tradingday, the average 2008 IPO ended the year36% below its offering price. In 2007,the average IPO appreciated 15% by theend of the year. Only 16% of 2008 IPOswere trading at or above their offeringprice at year-end, compared to 55% in2007. The best-performing IPOs of 2008were Grand Canyon Education (up 57%),CardioNet (up 37%) and Visa (up 19%).9.132.2200125.46.419.0200215.26.19.1200346.539.0 31.440.415.38.7 5.2 10.930.326.229.4 31.32004200520062007Two 2008 IPOs more than doubled inprice on their opening days—Asia Time(up 143%) and Hong Kong HighpowerTechnology (up 110%)—but both endedthe year below their offering prices.The percentage of profitable companiesgoing public increased from 62% in2007 to 71% in 2008, while the medianannual revenue of IPO companiesincreased from $87.0 million to $113.5million. Both metrics evidenced the highstandards demanded of IPOs in 2008.In 2008, 9 IPOs (29% of the total)were completed by companies based in24.10.823.3 0.82008