U.S. IPO Pipeline Watches and Waits, Report Says

Potential IPO registrants are waiting for increased clarity and hoping for market momentum to carry them forward, according to the quarterly Ernst & Young LLP US IPO Pipeline Report.
The first quarter of 2008 watched the wave of 2007 begin to flatten with 90 IPOs in the U.S. markets’ pipeline, the same number of IPOs as in the pipeline in Q4 of 2007. These registrations represent $17.3 billion, up slightly from the $16.8 billion of last quarter even after Visa went public and was removed from the pipeline.
The number of new registrants remains stable, with 23 filing to go public in Q1 2008, compared to 24 in Q4 2007. But January’s surge of 10 new registrants may have been the crest of the record-breaking numbers in 2007, as February brought in six new registrants and March saw seven.
“Most market observers talk of waiting for a positive second half of the year, but to keep its pace of new registrants without starting a trend of withdrawals, the markets need to pick up during the second quarter.” said Maria Pinelli, Americas director, Strategic Growth Markets, Ernst & Young LLP. “Patience and confidence are likely to ebb by June, but if you’re a good company with solid business plans, practices and proven results, opportunities still await you in the markets.”
Compared to last year at this time, the overall IPO pipeline is not as robust.
“While the total numbers waned from last year, they also get older sitting in the pipeline,” said Jackie Brya, Americas IPO leader, Ernst & Young LLP. “In Q1 of 2007, companies sat for an average of 113 days compared to 163 days for Q1 2008. More than five months without resolving those costs can start to test any CFO’s patience.”
Among industry sectors, technology maintained the steady current to the IPO pipeline during this time of wait and see. The three most active sectors in the Q1 pipeline were technology (26 registrants), biotech (12 registrants) and pharmaceuticals (11 registrants). Technology also grew in dollar amounts, with companies filing to raise $3.3 billion, compared to $2.8 billion in the Q4 2007 pipeline. Oil and gas and pharmaceuticals filed to raise $1.9 billion each.
“Technology also continues to attract our foreign issuers, with four out of the five non-US pipeline registrations coming from technology or biotech. Pharmaceuticals are slightly more active than in Q4, but the oil and gas sector pipeline dove more than 60 percent from Q4’s total dollars,” said Brya.
In Q4 of 2007, oil and gas companies were registered to raise $5.3 billion, compared to Q1 2008, in which they registered to raise $1.9 billion.
State by state, California companies were the most active with 15 filings, representing 16.7 percent of the total number of filings. Texas followed with 11 registrants, New York with eight and Massachusetts with seven.
The Ernst & Young U.S. IPO Pipeline Report is issued quarterly as a forward-looking indicator of the IPO market. The IPO Pipeline data is refined to eliminate bias from financial services organizations, real estate investment trusts and other holding companies that represent assets under management instead of core businesses. It also eliminates any registrants sitting on the books for more than 12 months – long-term applicants that may bloat numbers, but don’t reflect the current market trend.

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