Initial public offering activity came to a virtual standstill in September, but is expected to pick up with a changing economic landscape.
Extreme market volatility and global economic uncertainty bear the blame for a sharp drop in initial public offering proceeds in the third quarter of 2011, according to a report released yesterday by PricewaterhouseCoopers.
Proceeds fell from a robust $12.3 billion in the second quarter of the year to $3.1 billion in the third quarter, said the company in a prepared statement that also reported a year-over-year decline in activity. Twenty initial public offerings took place in the third quarter of 2011, a 35 percent drop from the third quarter of 2010, which saw 34 offerings that raised $4.8 billion in revenue.
July maintained the momentum of the second quarter with an initial public offering count of 15, but activity dropped off sharply in August. A spike in market volatility prompted companies to postpone 10 scheduled public offerings and the drought continued through September. Only five companies went public over the two-month period, a rate well below the monthly initial public offering average of 14 experienced in the first two quarters of this year.
Short-term market events have not discouraged 74 companies from registering for a future initial public offering. The number of applications in the pipeline is up from the same period in 2010 - when 67 companies began the registration process - and slightly down from the 77 companies that filed registration statements in the second quarter of 2011.
According to Henri Leveque, head of PricewaterhouseCooper’s capital markets and accounting advisory practices, “The robust pipeline provides a positive outlook for IPOs to continue, however, potential issuers are clearly considering the market conditions in evaluating the time of their offering as evidenced by the increased postponements.”
Technology companies accounted for 21 of the new companies entering the registration process. Companies in the financial services and industrials sectors accounted for 12 new filings each, while 11 energy companies entered the filing process. Leveque said, “The consistent filing activity in the third quarter of 2011 provides optimism amidst a lackluster quarter in terms of pricing activity, as the pipeline remains primed for a strong showing in the fourth quarter of 2011 and 2012.”
Year-to-date initial public offering value has doubled compared to last year, totaling $27.8 billion and $14.2 billion respectively.