The US initial public offerings market showed strength in the first quarter. Forty-four companies went public—the highest number since the first quarter of 2007, and up from 33 in the first quarter of 2011, according to PwC’s IPO Watch report.
At an offering value totaling $5.8 billion, first-quarter IPOs raised only about half as much this year as last year, and the average IPO size dropped 67% to $131 million, largely because offerings that raised $1 billion or more were missing.
Still, it bodes well that new issuers attracted strong after-market interest from investors this year, Henri Leveque, leader of PwC’s US Capital Markets and Accounting Advisory Services, said in the report.
Three of the five highest day-one IPO returns in a year occurred in March and the first-quarter new-issuer IPO market as a whole produced returns of 29%, outperforming a very strong Standard & Poor’s return for the quarter of 12%.
“The quarter ended on a high note with well-received pricings in the last week of March, capping off a successful February and March after a slow start in January,” Neil Dhar, leader of PwC’s US Capital Markets Services, said in the report.
The high level of activity was driven by companies backed by private equity and venture capital firms, according to Ernst & Young’s US IPO Pipeline Analysis.
Looking ahead, E&Y and PwC cautioned companies to make sure an IPO is the best decision. “We expect the window of opportunity for companies in the IPO process to fluctuate due to the cautious outlook for the global economy,” PwC’s Dhar said.
And with a lot of cash sitting on some corporate balance sheets, there are other options, Herb Engert, E&Y’s strategic growth markets practice leader, said in the report. “We will still see some choppiness in the markets despite increasing market confidence.”
As of March 31, 164 companies wanting to raise $32 billion were registered to go public on US exchanges, according to E&Y. That’s down from 178 IPO filings with proceeds of $28.4 billion at the end of 2011.
—Sabine Vollmer (email@example.com) is a CGMA Magazine senior editor.