Capital Markets

One IPO Step Forward, Two Steps Back

Q2's new entries to the pipeline increase a bit, to 30, but withdrawals drain more from the total, E&Y report shows.
Stephen TaubAugust 5, 2008

A few more companies registered to go public through initial public offerings in the second quarter, but the pipeline of companies planning IPOs shrank slightly, according to the quarterly Ernst & Young U.S. IPO Pipeline Report

Because of withdrawals from the pipeline or companies actually going public, only 80 companies remained registered by the end of the second quarter, down from 90 at the end of the previous quarter, the report showed. Of those removed from the pipeline, 19 companies withdrew or postponed their offerings and 12 were removed after sitting in the pipeline for over a year, with 9 companies actually making it to the public markets.

Companies in the current pipeline seek to raise $15.5 billion, down from $17.3 billion at the end of the first quarter, according to the E&Y research. The accountancy cites reasons for the weakening IPO market that includes high market volatility, the slowdown in the world economy, sustained high oil prices, and overall uncertainty.

The slight rise in new registrants, however — to 30, from 23 in the first quarter, and 24 in the 2007 fourth quarter — does offer something of a light in the tunnel.

Technology (22 companies) and biotechnology (13 companies) are still the leading sectors in the current pipeline, though these two industries also represented the most withdrawals.

According to the report, the average amount of time companies wait in the pipeline has nearly doubled over the past year. On average, IPOs now in the pipeline have remained there for 170 days, E&Y noted. Last year at this time, IPOs waited in the pipeline just 98 days on average.