IPO Market

IPO activity in the middle market plunged by more than half in the third quarter of 2015 but average deal size increased by almost 46%, suggesting there is still investor demand for select issues despite equity market volatility and uncertainty, CohnReznick said on Thursday.

The professional services firm reported Thursday that 27 middle-market IPOs priced in the third quarter of 2015, compared with 57 the year prior. Year to date, 113 middle-market IPOs were issued compared with 179 through the first three quarters of 2014.

Total IPOs priced on U.S. exchanges also lagged in the third quarter, dropping 41% over the same period in 2014. Forty-one IPOs priced in last quarter, compared with 69 in the third quarter of 2014.

But the average proceeds raised per middle-market IPO was $182 million, compared with $125 million a year ago. The middle market includes companies with market caps between $10 million and $2 billion post-IPO.

“Despite the lag in the number of IPOs, good deals will rise to the top and, when they do, they will be recognized and rewarded by investors,” Alex Castelli, partner and co-leader of CohnReznick’s national liquidity and capital formation advisory group, said in a news release.

“Market uncertainly may have eroded some investor and issuer confidence for the short term, but practically there seems to be continued interest when the right company issues an offering,” he added. “And for those companies, the IPO continues to be a viable source for capital.”

Smaller IPOs (those raising $50 million or less in proceeds) declined by 50%, decreasing to seven in the third quarter.  “Even though various components of the JOBS Act have helped stimulate access to capital, many smaller issuers still find the IPO process to be expensive and onerous,” CohnReznick noted.

The health-care and life sciences sectors accounted 44% of all third-quarter IPOs.

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