IPOs Take a Breath in Q1 2015 After a Sizzling 2014, According to PwC’s Deals Practice

Volumes return to pre-2014 levels

NEW YORK – April 7, 2015 – US IPO proceeds slowed down to levels not seen since the first quarter of 2012 when the IPO market was rebounding from the financial crisis, with 41 IPOs raising $6.2 billion, according to IPO Watch, a quarterly survey by PwC US. This quarter’s proceeds were slightly over half the $11.0 billion raised in the same quarter last year, and were also down 63 percent compared to fourth quarter 2014 which raised $16.6 billion. Capital markets in the US generally turned in a very positive quarter, with both follow-on equity offerings and high-yield debt attracting strong investor interest.

The 41 IPOs completed in the first quarter of 2015 represent a 42 percent decrease from the 71 issuances recorded in the robust first quarter of 2014. IPO volume this quarter was also down significantly compared to the previous quarter which recorded 76 issuances. However, activity in the first quarter generally tends to be subdued when compared to other quarters as many companies wait for year-end numbers.

“While we saw a decline from the vigorous pace of activity in 2014, 41 IPOs in the first quarter is generally in line with historical first quarter IPO volume since 2010,” said Henri Leveque, Partner, U.S.Capital Markets and Accounting Advisory Services leader, PwC’s Deals Practice. “As long as the broader stock market remains stable in the face of mounting domestic and global uncertainty, it is likely we will continue to see a robust atmosphere for IPOs and follow-on offerings.”

On a sector basis, the healthcare industry led IPO market activity, accounting for 41 percent of total volume for the quarter with 17 IPOs. The financial sector led in offering value, accounting for 29 percent of the total or approximately $1.8 billion in IPO proceeds. The healthcare sector also led in follow-on offerings in terms of both volume and value for the first quarter of 2015.

“The interest in high growth companies among investors remains prevalent as demonstrated by the demand for biotech IPOs in the current low-yield environment,” said Neil Dhar, Partner, U.S. Capital Markets leader, PwC’s Deals Practice. “In the face of increased market volatility, it is important to explore and consider various market opportunities.”

Financial sponsors, and in particular venture capital companies, remained active in the first quarter of 2015, backing 46 percent of both total IPO volume and value. The healthcare and technology sectors lead the quarter in financial sponsor-backed activity.

First quarter IPOs saw strong aftermarket performance, returning 16 percent between IPO and quarter close and outperforming the S&P 500 which closed at less than one percent for the quarter.  The highest IPO date to quarter-end returns came from the Consumer (138 percent), Energy (21 percent), and Healthcare (18 percent) industries. Additionally, the average first day gain of the 41 IPOs that priced during the first quarter was 10 percent.

According to PwC, there were 253 U.S. follow-on offerings in the first quarter raising a total of $68.8 billion, representing an increase of 103 percent in volume and 92 percent in value from the previous quarter. Of the follow-on offerings in the first quarter, 23 percent of the follow-ons were backed by financial sponsors looking to systematically exit portfolio investments.

During the first quarter of 2015, there were 130 high-yield debt issuances completed for a total of $91.6 billion compared to 146 transactions worth $74.9 billion in the same period last year (11 percent decrease in volume and 22 percent increase in value). The main purposes of the debt offerings in the first quarter of 2015 were for refinancing 55 percent of the time and acquisitions for 25 percent of the transactions.

 

PwC US IPO Watch is a quarterly and annual survey of IPOs listed on U.S. stock exchanges.  These include IPOs by domestic and foreign companies, filings with the FDIC, and bank demutualizations.  IPOs do not include unit investment trusts, best efforts, commodity trusts and fully classified closed-end funds.  Visit our website, www.pwc.com/us/ipo, for the annual 2014 US IPO Watch and information about PwC’s IPO Services.

PwC helps corporate and financial sponsors achieve their growth initiatives from deal strategy through value capture. PwC’s Deals professionals support clients on a wide range of transactions including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, as well as bankruptcies and other types of business reorganizations.

For more information, visit: www.pwc.com/us/deals

 

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