Capital Markets

IPO Pipeline Holding Its Own

Very few companies are going public right now, but many are still planning to do so.
Stephen TaubOctober 28, 2008

The equity IPO market may be all but dead at the moment, but the pipeline is actually in pretty good shape, according to a new Ernst & Young report.

Seventy-nine U.S. companies were in the IPO pipeline at the end of September. That was virtually unchanged from the count of 80 at the end of the second quarter, and there were 29 new registrations in the third quarter.

Still, just four companies successfully went public last quarter, according to E&Y, as global IPO activity fell to its lowest level since 2003. Nine companies went public in the second quarter.

Companies and investment bankers usually are uneasy about bringing new stock offerings to the market during turbulent times. “Companies are clearly waiting for the market to open up,” said Maria Pinelli, Americas director for strategic growth markets, at Ernst & Young.

In the meantime, private equity and other strategic partners are looking to companies in the pipeline as targets for possible investment, merger, and acquisition opportunities, Pinelli added.

To be sure, 30 companies were removed from the pipeline in the third quarter, including 19 that sat in registration for more than a year, seven that withdrew or postponed their IPO, and the four completed offerings.

In the second quarter, there were 12 companies removed after a year, 19 withdrawals or postponements, and the nine successful IPOs.

Altogether, the 79 companies in the pipeline at the end of the third quarter were seeking to raise a total of $17.6 billion, or an average of $231.4 million. This compares to $15.5 billion in the second quarter and $17.3 billion at the end of the first quarter.

However, at the end of the third quarter of 2007, there were 151 deals in the pipeline seeking a total of $30.4 billion.

Technology (19 companies) and biotechnology (11 companies) continue to be the pipeline’s leading sectors, although those two industries also represented five of the six withdrawals.

Technology companies are also seeking to raise the most of any sector, $3.2 billion.