NEW YORK, April 3, 2006 (PRIMEZONE) -- After a strong first-quarter start, the U.S. IPO market retreated in 2005 from three-year highs reached in 2004, according to PricewaterhouseCoopers' U.S. IPO Watch, a survey of IPO activity on U.S. stock exchanges. In total, there were 221 IPOs on the three U.S. exchanges, down from 260 in 2004, but far ahead of the 88 in 2003. Similarly, total IPO proceeds, while down 25 percent from their 2004 highs, were more than double the levels reached in 2003.
"Last year, the IPO market sent a positive signal that it may be returning to more sustainable levels after the pent-up demand unleashed in 2004. There were many mid-sized deals spread across industry sectors, with less reliance on billion dollar deals," said Scott Gehsmann, North American leader of PricewaterhouseCoopers' Global Capital Markets Group. "We are cautiously optimistic that 2006 will be equal to or slightly stronger than 2005," Gehsmann added. As in 2005, 2006 began strong, with 38 IPOs raising $8 billion through February, compared with 24 deals netting $4.9 billion in 2005. Whether the market will continue to grow or level off this year will hinge largely upon reasonable stability in three areas: the regulatory climate inside and outside the U.S., energy prices and interest rates.
According to Gehsmann, the following five factors characterized U.S. IPO activity in 2005:
-- Banking and biotechnology remain hot, but raise less, as
industrial and energy sectors gain. Banking was the most active
sector with 22 IPOs, followed by biotechnology, business services
and energy with 17 each, and healthcare and transportation with
16 each. Real estate investment trusts (REITs), communications,
chemicals, business services, energy and transportation accounted
for nearly 60 percent of IPO proceeds in 2005, compared with 2004
when the broad financial services and technology sectors accounted
for over half of proceeds raised.
-- IPO activity is broader. The top ten deals of 2005 included three
chemical companies, three REITs, an investment bank, a commercial
bank, a communication services company and a firm that provides
business services. The distribution of the top ten IPOs by
industry last year is in sharp contrast with 2004 when six of the
largest deals were in the technology/infocom sector, and is more
akin to 2003 when the top ten were spread across many sectors. A
significant decline in the number of biotech, software and
computer, and non-banking financial services IPOs last year, when
coupled with increased activity in the broad industrial sectors,
may signal a maturing IPO market.
-- Deals are smaller. Only two of the top ten IPOs in 2005 topped the
billion dollar mark, compared with 2004 when all ten raised more
than a billion. Reduced deal activity coupled with the decrease in
size of the average offering meant that the top 10 deals comprised
only 22 percent of the total IPO proceeds last year, compared to
30 percent in 2004 and 48 percent in 2003. We expect this pattern
to continue in 2006.
-- Non-U.S. companies stayed home. None of last year's top ten were
foreign registrants, which featured prominently in the previous
two years. In 2004, Semiconductor Manufacturing and China Netcom
Group were from China, LG Philips from Korea, and Telewest Global
from Britain.
-- The NYSE and the NASDAQ still dominate, but the AMEX had a good
year. While activity on the two largest U.S. exchanges declined
last year, both in terms of number of deals and total proceeds,
the median offering value on both actually rose, further evidence
of a sustainable, broader-based market less dependent on a few
blockbuster deals. Perhaps the biggest surprise last year was the
performance of the AMEX, which registered the second-largest
offering of 2005, Franklin Street Properties, a REIT that raised
$1.1 billion in June. AMEX also saw an increase in both the number
of deals and the median deal size. However, many of the historic
trends remained consistent, with the NASDAQ the leader in volume
while the NYSE led in deal size and total proceeds raised.
Looking at non-U.S. markets, Gehsmann had these observations:
-- Sarbanes-Oxley remains a concern for foreign registrants.
Concerns with having sufficient resources to meet the increased
regulatory burden of the Sarbanes-Oxley Act is believed to be a
primary reason for a decline in the number of non-U.S. IPOs on
U.S. exchanges. The recent increase in the number of foreign
private issuers (FPIs) de-listing their shares from U.S. exchanges
and de-registering from the SEC is a further indication that for
some foreign companies, the benefits of listing in the U.S. no
longer outweigh the costs of meeting more stringent compliance
requirements.
-- European IPOs are booming. The number of IPOs on European
exchanges surged 39 percent in 2005, rising from 433 in 2004 to
603, while proceeds increased from EUR27.7 billion (US$34.4
billion) to EUR50.7 billion (US$63.1 billion). Last year was the
first time since we began our study that activity on European
exchanges exceeded that of U.S. markets in terms of value as well
as volume.
-- London remains Europe's most active exchange. Among the European
exchanges, London witnessed both the largest number of IPOs and
the highest total offering value. London's success in attracting
IPOs from outside Europe (EUR7.4bn) and from other European
countries (EUR3.2bn) helped it move up from Europe's second
largest exchange in terms of offering value in 2004 to the largest
in 2005. The AIM, London's exchange-regulated market, welcomed
half of Europe's IPOs last year and thus was a major factor in
making London Europe's busiest market. But London's market share
fell to 59 percent in 2005 from 70 percent in 2004, as volume on
Europe's other exchanges grew even faster. Euronext was the second
largest exchange in terms of volume and value, followed by the
Deutsche Borse. While the Warsaw exchange ranked fourth in terms
of the number of IPOs, more capital was raised on the Borsa
Italiana, the Swiss Stock Exchange, and the Luxembourg Exchange.
-- Chinese markets look poised for growth in 2006. The "Greater
China" market -- which includes Hong Kong, Shanghai, Shenzhen,
and Taiwan -- witnessed a decline in IPO activity last year
following the suspension of new share issuances in Shanghai in
April 2005. This was done to facilitate China's plan to list
hitherto non-tradable shares in an orderly manner. Although deal
volume was down, proceeds from IPOs actually rose, reflecting
continued interest by mainland companies in Hong Kong markets,
especially its banking sector.
Gehsmann added that spin-off activity, which rose steadily during the second half of 2005, should also have a positive impact on the 2006 market, as more U.S. conglomerates take steps to separate undervalued businesses, and search for ways to continue compensating shareholders. "Bottom line, investors will reward companies with growth potential, established revenue and profits."
U.S. IPO Watch is a quarterly survey of all IPOs listed on U.S. exchanges. These include IPOs by domestic and foreign companies, best-efforts, business development companies, filings with the FDIC, and bank demutualizations. IPOs do not include unit investment trusts, and fully classified closed-end funds. This survey captures IPOs listed between January 1, 2005 and December 31, 2005. Visit our website, www.pwc.com/ustransactionservices, for our 2004 U.S. IPO Watch report.
The Global Capital Markets Group advises a wide range of U.S. and non-U.S. companies on entering the U.S. and overseas capital markets. Our worldwide network of transaction specialists supply U.S. and non-U.S. corporations and private equity firms with transaction support, project management services, assistance in resolving technical accounting issues, and advisory support and guidance on the S.E.C. registration process. The Global Capital Markets Group is part of the Transaction Services group of PricewaterhouseCoopers, which offers dedicated deal teams operating from 15 U.S. cities and some 90 locations in North America, Latin America, Europe and Asia.
The Transaction Services group of PricewaterhouseCoopers (www.pwcglobal.com/ustransactionservices) offers a deal process that helps clients bid smarter, close faster and realize profits sooner on mergers, acquisitions, divestitures and financing transactions. Dedicated deal teams operate from 15 U.S. cities and some 90 locations in North America, Latin America, Europe and Asia.
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
The PricewaterhouseCoopers logo is available at: http://www.primezone.com/newsroom/prs/?pkgid=2126