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2012 IPO Market Surpasses 2011, Despite Slowdown in Fourth Quarter Activity, PwC Says

2012 IPO Volume and Proceeds Raised Exceeds 2011 Positive Returns and IPO Pipeline Fuels Cautious Optimism for 2013

NEW YORK, Dec. 19, 2012 /PRNewswire/ -- Total volume and proceeds raised in the 2012 IPO market increased over 2011, despite the slowdown in activity during the fourth quarter, according to IPO Watch, a quarterly and annual survey of IPOs listed on U.S. stock exchanges by PwC US.  Following a strong performance in October, the market pulled back as companies waited for clarity on U.S. fiscal policy, PwC said. For the full year, the IPO market saw 138 companies completing their IPOs as of December 13, 2012, raising total proceeds of $40.7 billion, compared with 134 companies that had completed their IPOs for all of 2011 raising $35.5 billion, according to the survey.

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Although the 2012 volume of IPOs surpassed 2011, the value raised -- when excluding the $16.0 billion Facebook IPO -- was only $24.7b, which was a 30% decrease in proceeds raised. The current year lacked the large number of billion dollar plus IPOs in 2011, and saw the average IPO size in 2012 decrease to $180 million when excluding Facebook, which was a reduction of 32% from the average IPO in 2011 of $265 million.   

The IPO market began robustly in the fourth quarter, with October IPO volume equaling that of March - both months were the highest of the year with 21 IPOs. IPO proceeds during October reached the second-highest monthly level of the year, after May, which included the Facebook IPO.  IPO activity began to retreat in November as investors turned their attention to the Presidential election and fiscal outlook.  All told, there were 33 U.S. IPOs in the fourth quarter of 2012, surpassing the 29 IPOs in the third quarter of 2012, and 28 IPOs in the fourth quarter of 2011. Total proceeds raised in the fourth quarter were $6.3 billion, down 5 percent from $6.6 billion the third quarter of 2012, and down 3 percent from $6.4 billion in proceeds in the corresponding quarter in 2011. 

Click here to view: Value and volume of IPOs by quarter

Click here to view: Q4 comparison: Value and volume of IPOs

"Following a very strong October, companies began to take a more cautious approach given the presidential election, uncertainty of the Congressional budget negotiations and the fiscal cliff," said Henri Leveque, leader of PwC's U.S. Capital Markets and Accounting Advisory Services.  "Still, the 2012 IPO market surpassed the prior year on the strength of several larger offerings and opportunistic moves by smaller companies looking to tap the public markets when windows opened."

According to PwC, financial sponsors continued to remain active in U.S. IPOs, backing 42 percent of Q4 2012 IPOs and 68 percent of the IPOs on a year-to-date basis.  Private equity also remained active in executing on new deals, accounting for 18 percent of total M&A deal volume in 2012, according to PwC's M&A Outlook.  

Click here to view: Value and volume of Financial Sponsor-backed U.S. IPOs

"Financial sponsors continued to use the equity markets to monetize their earlier investments while accessing the debt markets to finance new transactions," said Leveque. "Further, the increased availability of debt, including high yield, is fuelling new transactions and creating a long-term sustained pipeline of potential IPOs down the road."

During the fourth quarter of 2012, the energy and financial services sectors, which had ten and seven IPOs respectively, were the leading sectors with 33 percent and 26 percent of the proceeds, respectively.

Click here to view: Value and volume of U.S. IPOs by industry

IPOs continued to outperform as a sector in the fourth quarter, with stock price gains exceeding broader equity market returns. On a quarter-to-date basis, all 33 IPOs that priced in the fourth quarter of 2012 increased their price by an average of 11 percent on their first day of trading, and averaged a return of 12 percent after one week.  In addition, on a quarter to date basis, all 33 IPOs are on average 21 percent above their issue price, again outperforming the S&P500, which showed a quarterly decline of approximately one percent.

Two-thirds of IPOs priced within the initial projected range, with four of the 33 IPOs pricing above their initial projected ranges, 22 pricing within their initial projected range, and seven pricing below their initial projected range.

According to publicly available filing information, 17 companies entered the IPO registration process during the fourth quarter of 2012, a 55 percent decline from the 38 companies that entered in the third quarter of 2012. Three of the 17 new filers also priced in the fourth quarter of 2012.   The publicly visible IPO pipeline also declined during the fourth quarter and as of December 13, 2012, the overall IPO pipeline of companies that had filed in 2012, included 63 companies seeking to raise $13.2 billion. This represents a 34 percent decrease compared to the 95 companies in the pipeline at the end of the third quarter 2012, and a 31 percent decrease in the proceeds being sought. The pipeline is led by the Technology, Healthcare, Financial, Energy and Consumer sectors. These five sectors combined account for 87 percent of the total proceeds being sought in the pipeline.

According to PwC, a portion of this decline may be due to the confidential filing provisions provided by the JOBS Act, which were designed to allow Emerging Growth Companies (EGC) the ability to work confidentially with the SEC, and are only required to publicly disclose their filings within 21 days of their anticipated IPO roadshow.  During the fourth quarter of 2012, 27 of the 33 IPOs that priced their offerings were EGCs, as defined under the JOBS Act.  "From our perspective, the IPO pipeline remains healthy, as we continue to provide support and preparation to the increasing number of (EGC) filing confidentially under the JOBS Act," added Leveque.

According to PwC, despite the pause in IPO pricings during the fourth quarter, the runway for entering the public markets is active as reflected by the considerable number of companies that are filing under the JOBS act.  This underlying volume of activity bodes well for the IPO market as we enter 2013.

Outside of the U.S., the positive trends in European IPO activity seen at the end of the third quarter have continued into the fourth quarter, which is set to be the strongest of the year with two IPOs in London and one IPO in Germany raising in excess of €1 billion each.  While economic and political conditions remain challenging across Europe, the outlook for IPOs is as positive as we have seen for some time.

Meanwhile in Asia, IPO activities regained pace with the debut of another mega IPO on the Hong Kong exchange raising USD 3.1 billion, becoming the largest offering in Asia ex Japan after a USD3.3 billion IPO in Malaysia in June this year.  Interest in listing in Asia is expected to resume gradually with market sentiments and fund flow liquidity continuing to pick up well into 2013 and a strong pipeline of potential listings that companies have postponed from 2012.

PwC US IPO Watch is a quarterly and annual survey of IPOs listed on U.S. stock exchanges.  These include IPOs by domestic and foreign companies, best-efforts, business development companies, filings with the FDIC, and bank demutualization's.  IPOs do not include unit investment trusts, commodity trusts and fully classified closed-end funds.  Visit our website, www.pwc.com/us/ipo, for the annual 2011 US IPO Watch and information about PwC's IPO Services.

PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution.  We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual.  Our local and global deal strength is derived from over 1,400 deal professionals in 21 cities in the U.S. and over 9,800 deal professionals across a global network of firms in 75 countries.  In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S.  For more information, visit www.pwc.com/us/deals.

About the PwC Network
PwC firms help organizations and individuals create the value they're looking for. We're a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.

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© 2012 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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