Investment bankers are optimistic about initial public offerings for the remainder of the year, according to a recent survey of 100 bankers by accounting firm BDO USA. Nearly 60% expect the number of U.S. IPOs to increase in the second half of 2011, by an average of 9.5% over the number in the first half. Only 13% of bankers expect a decline.
This year has already been a fairly robust one for the IPO market, relatively speaking. Year-to-date, 75 IPOs have priced, according to Renaissance Capital, up from 60 at this point a year ago. And the dollar volume has nearly tripled, with $25.2 billion raised so far this year, compared with $8.8 billion as of last June. So far 151 companies have filed to go public in 2011, up 24% from 2010.
However, the rising tide may not lift all boats. While new-media companies such as LinkedIn and Pandora have received most of the hype, many of the larger IPOs have in fact been those of well-established firms that were backed by private-equity investors. One company in that category, hospital chain HCA Holdings, raised $3.79 billion; another, energy-pipeline firm Kinder Morgan, raised $2.9 billion. By contrast, LinkedIn raised $352 million in its debut. Bankers were most likely to cite the continued presence of such PE-backed firms as a reason they expect deal size to go up. Several, including Toys “R” Us and Dunkin Brands, have already filed to go public.
“These are not necessarily new start-up companies,” says Wendy Hambleton, a partner in the capital markets practice of BDO USA. “Investors are looking for more stability and profitability.”
Indeed, venture capitalists, whose investments are often competing with PE-backed firms for equity-investor dollars, have a different take on the market. In another survey released at the same time as the BDO data, 87% of U.S. venture capitalists say they think the current level of IPO activity is lower than necessary to support the health of the venture-capital industry.
So far, technology has been the most popular industry for IPOs, a trend that is likely to continue. Energy companies also seem to have good support. The votes of confidence are most muted for companies in the consumer/retail and industrial/manufacturing industries.
