May 23, 2017

May 22, 2017

Subscribe to Latest Legal News and Analysis

U.S. IPO Market: Can We Bounce Back From Two Slow Years?

The U.S. IPO market began 2017 with a solid start, with 25 IPOs raising nearly $10 billion in the first quarter and another 31 IPOs in the second quarter through May 15. We have a number of U.S. and non-U.S. clients moving ahead on U.S. IPO plans in 2017. Will the IPO market in the United States experience a renaissance? While IPOs in the U.S. fell off the map after a slowdown in 2015, the market looks to be bouncing back.

The 25 IPOs in Q1 2017 differs drastically from 2016’s first quarter, which had just 8 IPOs raising $0.7 billion. First quarter IPO activity in 2017 also reflected broad sector diversification, with energy, technology, and healthcare deals topping the lists. Tech raised the greatest amount of money thanks to the long-awaited Snap IPO of $3.4 billion, the largest IPO of a U.S. tech company since Facebook. Yet, the energy sector had the highest number of IPOs, with five companies going public last quarter—more than the total number of energy IPOs in all of 2016.[1]

Chart A: U.S. IPO Activity (2017 data through May 15, 2017)

chart a

These signs of life come after a drop off in IPOs in 2015 and 2016, a steep fall after the IPO boom of 2014. The U.S. IPO market has been slow to regain strength after the tech boom of the late 1990s, facing a particularly major blow after the 2008 financial crisis. With only 31 IPOs completed in 2008, the market had its lowest number of IPOs in over the last 20 years. 2014 marked the most active year for IPOs in the U.S. since 2000, with 275 IPOs and $86.6 billion raised. Market instability in the second half of 2015 and early 2016 hurt the U.S. IPO market, but I believe that the solid start to 2017 indicates a possible renaissance of companies going public. If the momentum carries into the following quarters, I believe we could see a steady revival of the IPO market from 2017 into the next few years. Still, there are a number of bigger companies that have continued to raise private capital and hold off on an IPO, including Airbnb, Lyft, and Houzz. Airbnb is leading the pack with $1 billion raised in its latest round of funding, while Lyft just closed a $600 million round.[2]

Chart B: Key US IPO Statistics

chart b

IPO Statistics for the First Quarter of 2017:

  • 25 U.S. IPOs and $9.9 billion raised. This compares to 8 IPOs and $0.7 billion raised in the first quarter of 2016.

  • Average IPO performance in 1Q 2017: 11% gain.

  • Snap raised $3.4 billion in the largest US IPO since Alibaba in 2014, and the largest IPO of a US tech company since Facebook in 2012.

  • The quarter’s second-largest IPO, Blackstone’s $1.5 billion offering of home rental REIT Initiation Homes, was also a larger deal than any IPO in 2016.

  • Nearly half of all the IPOs in the first quarter were backed by private equity, beating venture capital for the first time since 2013.

  • The median deal size for the first quarter was $190 million, the largest it has been in years and double the full-year 2016 median.

  • Energy led the quarter in terms of deal count, with 5 IPOs. The Keane Group had the largest deal, raising $584.7 million.

  • Through May 15, 2017, there have been 56 U.S. IPOs, a 154.5% increase from the same date last year.

  • Global IPO issuance totaled $24.2 billion in the first quarter of 2017, with 70 deals closed. Asia Pacific led the market with 41% share of all proceeds raised, while North America took a close second with 39% share of proceeds.


[1] Please note that there will be some variance in the statistics for IPOs generally. This is because most data sets exclude extremely small initial public offerings and uniquely structured offerings that don’t match up with the more commonly understood public offering for operating companies. The IPO data in this post is based on information from Renaissance Capital- manager of IPO-focused ETFs- www.renaissancecapital.com.   

[2] Listed in company profiles at http://pitchbook.com.

©1994-2017 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

TRENDING LEGAL ANALYSIS


About this Author

Megan N. Gates, Mintz Levin, Capital Markets Attorney, Securities Litigation Law
Member

Megan is Co-chair of the Securities Practice. She concentrates her practice on providing counsel to public companies with respect to compliance obligations under the Securities Exchange Act of 1934, in connection with public and private financings, and on merger and acquisition transactions.

Megan frequently advises clients on corporate governance matters, including compliance with the Sarbanes-Oxley Act of 2002. She also has extensive experience with tender offers, exchange offers, and going-private transactions.

Megan frequently speaks at conferences on securities offerings...

617-348-4443
Sahir Surmeli, Energy, Cleantech, Attorney, Mintz Levin, Law firm
Member

Sahir represents emerging growth and established energy and clean technology, life sciences and information technology companies, investors and investment banks in public offerings and private financings, mergers & acquisitions, joint ventures and strategic partnerships. In 2013, Sa was listed among the Top 100 Cleantech & Renewables Lawyers by Euromoney’s LMG Cleantech & Renewable Energy.

Sa serves as Co-chair of the firm's Energy & Clean Technology Practice, which serves more than 250 clients. Since 2006, the firm’s Energy & Clean Technology Practice has completed more than 300 transactions in this sector totaling over $7 billion. In 2013 the firm was listed among the “Top 10 Clean Technology Firms" by Euromoney’s LMG Cleantech & Renewable Energy. The Energy & Clean Technology Practice has been ranked #2 nationally among top Clean Technology law firms, according to Watershed Capital Group, and the practice was listed as a “Best Law Firm” by U.S. News & World Report, both in Boston and nationally.

Sa has worked on a wide variety of capital-raising projects, including equity, debt, syndicated loan, strategic investment and structured finance offerings, with aggregate proceeds of more than $10.6 billion. He has extensive experience in corporate finance and securities law as well as mergers and acquisitions. Sa represents issuers, underwriters, initial purchasers, and placement agents in public and private equity offerings, debt offerings (particularly high-yield, but also investment grade), bank financings, leveraged buyouts, securitizations, and related transactions as well as private equity funds in leveraged buyouts.

617-348-3013