Capital Markets

IPOs Set Early Season Record

The companies going public this year, however, are much bigger and more seasoned than the dotcoms that once dominated the new-issue market.
Stephen TaubFebruary 18, 2005

In 2005, companies have already raised $8.4 billion from newly issued common stock — a record for initial public offerings at this stage of the year, according to USA Today.

That figure tops even the $7.6 billion raised by IPOs during the comparable period in early 2000, at the top of the tech/Internet bubble, according to the newspaper.

The companies going public this year, however, are much bigger and more seasoned than the puny, overhyped dotcoms that dominated the new-issue market in 2000. Despite this year’s higher dollar total, there have been only 34 IPOs so far in 2005 compared with 57 during the same period of 2000.

USA Today pointed out that many of today’s IPOs come from bigger companies in mostly mature industries, such as real estate and heavy industry, rather than technology and Internet companies. The company with this year’s biggest offering to date, chemical producer Huntsman, has been around for something like three decades.

In fact, the median age of companies going public in 2004 was eight years, according to the newspaper, which cited University of Florida professor of finance Jay Ritter. The long-term median is seven years, according to the paper; the figure for 1999 was just four years.

This year has also seen more spinoffs and divestitures from larger companies. Chemical giant Celanese was the second-largest IPO this year, according to the paper; in 2003 private equity group Blackstone bought Celanese from Hoechst and raised $800 million in the offering.

Meanwhile, just 20 percent of companies currently in the IPO pipeline are in the technology industry, according to USA Today, which cited Linda Killian of Renaissance Capital. Killian pointed out that over the long haul tech, generally represents 35 percent of total IPOs, and that during the 1990s, tech typically accounted for 60 percent of the new issues.

Another difference from five years ago: Investors are not making the big bucks right out of the gate. For example, this year’s crop of IPOs climbed only 7 percent from their initial prices and are flat for the year from their first-day close, according to the paper, citing Renaissance.

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