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Ernst & Young: IPO Pipeline More Vigorous Than Last Year

By John Morgan   |   Tuesday, 25 Sep 2012 08:00 AM

The U.S. market for initial public offerings (IPOs) has been stronger both in the third quarter of 2012 and year to date than it was in the same periods last year, according to an analysis by Ernst & Young.

In the third quarter of this year, there were 21 effective IPOs versus 16 in the third quarter of 2011. Year to date, IPO volume and value for the nine months ending September 30 were estimated at 90 deals and $31 billion, respectively, up from 85 and $28 billion, respectively, in 2011.

“Looks like we’re headed back to work bolstered by measures from the European Central Bank and our own Federal Reserve to restore confidence in the markets,” said Herb Engert, strategic growth markets practice leader for Ernest & Young.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.  

Engert said he is “seeing signs of life with a flurry of activity” at the end of the current quarter, including fresh offerings from National Bank Holdings, Susser Petroleum Partners, Capital Bank Financial and Trulia.

Total U.S. IPOs in the pipeline as of September 21, 2012 declined to 114 in the third quarter from 129 in the second quarter of 2012 and 181 in the third quarter of 2011

Of the 21 IPOs in the third quarter, nine priced within or above their price range, while 12 priced below their expected range. Average IPO size in the pipeline increased to $230 million in the third quarter from $175 million in the second quarter.

Jackie Kelley, Ernst & Young’s Americas IPO leader, said the resulted showed investors are favoring small and mid-sized offerings.

The current IPO market is emphasizing companies that have strong fundamentals, according to Doug Baird, chairman of equity capital markets at Citigroup Global Markets.

“Can I take anything public at any ridiculous valuation and expect a great outcome? The answer to that question is no. Our experience in the current IPO market is it’s a very rational mature market,” he said.

Technology is not the major driver of the current IPO market, Baird said, noting there have been a number of other IPOs in areas like oil and other energy offerings.

“This IPO market is very broad. Tech is a little less than one third of the calendar. Industrial companies and consumer companies broadly defined — they are as active in the IPO market as the tech industry is.”

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 

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