2009 IPO Report - WilmerHale
2009 IPO Report - WilmerHale 2009 IPO Report - WilmerHale
US IPO Market Review and Outlook3the eastern United States (east of theMississippi River), western US–basedissuers accounted for 13 IPOs (42% of thetotal), and foreign issuers accounted forthe remaining 9 IPOs (29% of the total).Eastern US IPOs raised $2.8 billion ingross proceeds (12% of the total), westernUS IPOs raised $20.5 billion (85%), andforeign-issuer IPOs raised $0.8 billion(3%) of the year’s IPO proceeds.Percentage of Profitable IPO Companies – 1998 to 2008%5626 265261655962646271California maintained its position atopthe IPO state rankings with five IPOs,followed by Texas with four. China ledamong foreign-based issuers, with fiveIPOs, followed by England with two.19981999Source: IPO Vital Signs200020012002200320042005200620072008The percentage of IPO companies listingon Nasdaq—the preferred listing choicefor many venture-backed and technologycompanies—decreased from 62% in2007 to 39% in 2008, while the NYSE’smarket share increased from 36% to 55%.Surprisingly, and probably due to the smallsample size, the average IPO offering sizewas larger for companies listing on Nasdaq($111.7 million) than for companieslisting on the NYSE ($78.6 million).2009 OutlookIn broad terms, the US IPO markethas gone through five phases overthe past two decades or so:■1991 to 1998—Reasonably stablemarket, producing an averageof more than 550 IPOs per year■1999 and 2000—Go-go marketcharacterized by many unqualifiedIPO companies and rampant priceeuphoria (although annual dealvolume was about 15% lower thanin the preceding eight years)■2001 to mid-2003—Very selectivemarket, in which deal volumes fellsubstantially and IPO candidateswere held to much higher standards■Mid-2003 through 2007—Solidmarket recovery, although notapproaching the deal volumes thatprevailed for most of the 1990s■2008—Market hits historic lowsBy historical measures, the year 2008 wasan anomaly for the IPO market. In the firsthalf of 2009, however, the IPO outlookMedian Annual Revenue of IPO Companies – 1998 to 2008$ millions35.0199817.9 17.61999Source: IPO Vital Signs2000161.02001267.52002began to brighten amid a modest reboundin the capital markets and some signsthat the recession was beginning to abate.After only one IPO in the first quarterof the year, ten companies went publicin the second quarter of 2009—nineof these priced at or above the top of theirranges, and all but one of the ten wastrading above its offering price at mid-year.On a hopeful note for the beleagueredventure capital and private equityindustries, six of the IPOs in the secondquarter were by VC-backed companies,and another one was buyout-backed.144.5200385.72004105.9 111.12005200687.02007113.52008We remain fundamentally optimisticabout the long-term prospects forthe IPO market. The exact pace of themarket recovery, however, is impossibleto predict. Important factors include:■Economic Conditions: Economic growthis a key determinant of strength in thecapital markets. By late 2007, five yearsof economic expansion—largely drivenby strong consumer spending andboosted by low interest rates, tax cutsand increased borrowing against homeequity as housing values soared—hadsputtered to an end. The followingrecession has been longer and more
4 US IPO Market Review and Outlooksevere than almost anyone anticipated.At mid-year 2009, there are some signs ofrecovery, but the timing and extent of thereturn of economic growth is uncertain.■Capital Market Conditions: Stableand robust capital markets are a leadingindicator of IPO activity. After sharplydeclining in 2008, the Nasdaq stabilizedin the first quarter of 2009 and thenincreased by 20% in the second quarter.The Dow dropped another 13% inthe first quarter, before adding 11%in the second quarter, to approachbreakeven for the year to date. Mostobservers consider the markets’ prognosisfor the balance of the year to be mixed.■Impact of Regulatory Environment:Corporate governance reforms inthe United States have created newresponsibilities for public companiesand their directors and officers.These changes have helped improveaccountability to stockholders, boardoversight of management, board memberqualifications and investor confidence—but have also increased the cost ofbeing public, both in terms of potentialliability and the expense of compliance.The more rigorous corporategovernance environment may detersome IPO candidates, steer themto liquidity through acquisitions, incentthem to pursue IPOs in markets outsideof the United States, or cause themto pursue more unusual capital-raisingtransactions. There is some evidenceto support each of these suppositions.For most companies, however, thesecorporate governance changes can beassimilated into IPO planning and shouldnot pose a major impediment to goingpublic. The choppiness of the IPO marketfor much of this decade has far moreto do with economic and capital marketconditions than regulatory changes.■Venture Capital Pipeline: Venturecapitalists depend on IPOs—along withcompany sales—to provide liquidityto their investors. Only 13 VC-backedcompanies were in IPO registrationat mid-year 2009, according to Dow JonesVentureOne. With the uptick in IPOsby venture capital–backed companiesin the second quarter of 2009, thenumber of such companies enteringMedian IPO Offering Size – 1996 to 2008$ millions30.0199621615.0199633.01997Source: SEC filings12013.0199736.0199822.4681998Source: Dow Jones VentureOne25261.01999Venture Capital–Backed IPOs – 1996 to 200831.31999IPO registration, or resuscitatingdormant filings, is likely to increaseover the balance of the year.46.9 47.8 49.0Longer term, the pool of IPO candidateswill be affected by current trends inventure capital investing, includingthe timeline from initial funding to IPO.According to Dow Jones VentureOne,the median time from initial equityfinancing to IPO increased from 7.2 yearsin 2007 to 8.3 years in 2008—lengtheningthe period of time during which VCbackedcompanies must be privatelyfunded. As recently as 2004 and 2005,this figure hovered around 5.5 years.20184.020002000115.5 116.42001# of deals Median amount raised prior to IPO (in $ millions)22 18 23200120022002119.0200360.220036790.7200473.2200443102.6200552.02005■Private Equity Impact: Private equityinvestors also seek to divest portfoliocompanies or achieve liquidity throughIPOs. PE-backed companies are usuallylarger and more seasoned than VC-backedcompanies or other start-ups pursuingIPOs, and thus can be strong candidatesin a demanding IPO market. Althoughlargely shut out of the 2008 IPO market,buyout-backed companies—especiallylarge and profitable ones—can beexpected to return to the IPO marketas conditions permit.
- Page 1 and 2: 2009 IPO ReportAttorney Advertising
- Page 3: 2 US IPO Market Review and Outlook2
- Page 7 and 8: 6 Law Firm and Underwriter Rankings
- Page 9 and 10: Counsel of Choice fSERVING INDUSTRY
- Page 11 and 12: 10 Regional IPO Market Review and O
- Page 13 and 14: 12Takeover Defenses in IPO Companie
- Page 15 and 16: 14PIPE and Rule 144A Market Review
- Page 17 and 18: AnnouncingInitial Public Offerings:
- Page 19: 09_026 RPI 09/09 11,000WilmerHale r
US <strong>IPO</strong> Market Review and Outlook3the eastern United States (east of theMississippi River), western US–basedissuers accounted for 13 <strong>IPO</strong>s (42% of thetotal), and foreign issuers accounted forthe remaining 9 <strong>IPO</strong>s (29% of the total).Eastern US <strong>IPO</strong>s raised $2.8 billion ingross proceeds (12% of the total), westernUS <strong>IPO</strong>s raised $20.5 billion (85%), andforeign-issuer <strong>IPO</strong>s raised $0.8 billion(3%) of the year’s <strong>IPO</strong> proceeds.Percentage of Profitable <strong>IPO</strong> Companies – 1998 to 2008%5626 265261655962646271California maintained its position atopthe <strong>IPO</strong> state rankings with five <strong>IPO</strong>s,followed by Texas with four. China ledamong foreign-based issuers, with five<strong>IPO</strong>s, followed by England with two.19981999Source: <strong>IPO</strong> Vital Signs200020012002200320042005200620072008The percentage of <strong>IPO</strong> companies listingon Nasdaq—the preferred listing choicefor many venture-backed and technologycompanies—decreased from 62% in2007 to 39% in 2008, while the NYSE’smarket share increased from 36% to 55%.Surprisingly, and probably due to the smallsample size, the average <strong>IPO</strong> offering sizewas larger for companies listing on Nasdaq($111.7 million) than for companieslisting on the NYSE ($78.6 million).<strong>2009</strong> OutlookIn broad terms, the US <strong>IPO</strong> markethas gone through five phases overthe past two decades or so:■1991 to 1998—Reasonably stablemarket, producing an averageof more than 550 <strong>IPO</strong>s per year■1999 and 2000—Go-go marketcharacterized by many unqualified<strong>IPO</strong> companies and rampant priceeuphoria (although annual dealvolume was about 15% lower thanin the preceding eight years)■2001 to mid-2003—Very selectivemarket, in which deal volumes fellsubstantially and <strong>IPO</strong> candidateswere held to much higher standards■Mid-2003 through 2007—Solidmarket recovery, although notapproaching the deal volumes thatprevailed for most of the 1990s■2008—Market hits historic lowsBy historical measures, the year 2008 wasan anomaly for the <strong>IPO</strong> market. In the firsthalf of <strong>2009</strong>, however, the <strong>IPO</strong> outlookMedian Annual Revenue of <strong>IPO</strong> Companies – 1998 to 2008$ millions35.0199817.9 17.61999Source: <strong>IPO</strong> Vital Signs2000161.02001267.52002began to brighten amid a modest reboundin the capital markets and some signsthat the recession was beginning to abate.After only one <strong>IPO</strong> in the first quarterof the year, ten companies went publicin the second quarter of <strong>2009</strong>—nineof these priced at or above the top of theirranges, and all but one of the ten wastrading above its offering price at mid-year.On a hopeful note for the beleagueredventure capital and private equityindustries, six of the <strong>IPO</strong>s in the secondquarter were by VC-backed companies,and another one was buyout-backed.144.5200385.72004105.9 111.12005200687.02007113.52008We remain fundamentally optimisticabout the long-term prospects forthe <strong>IPO</strong> market. The exact pace of themarket recovery, however, is impossibleto predict. Important factors include:■Economic Conditions: Economic growthis a key determinant of strength in thecapital markets. By late 2007, five yearsof economic expansion—largely drivenby strong consumer spending andboosted by low interest rates, tax cutsand increased borrowing against homeequity as housing values soared—hadsputtered to an end. The followingrecession has been longer and more
Change language