PwC Charts the “Off” in Public Offerings

But while IPOs are sharply lower this year, the accounting firm's study finds the pipeline relatively strong.

New stock offerings, which already were weak when the year started, have been made much weaker by the worsening credit crunch.

In the first quarter of this year, there were just 25 initial public offerings, down sharply from the 68 IPOs for the same period last year, according to a quarterly report from PricewaterhouseCoopers’ Transaction Services group.

In terms of IPO proceeds, however, first-quarter results were skewed by the $17.9 billion Visa IPO, the largest U.S. offering ever. Excluding Visa, IPO values totalled $6 billion, down almost 50 percent from the $11.7 billion raised in the first quarter of 2007.

The main reason for the sharp decline: The tumbling stock market and uncertainty over when it will settle down.

Even so, PwC insists that the U.S. IPO pipeline appears relatively strong. It points to Thomson Financial data that count 179 companies have filed with SEC as of March 27, 2008 to raise capital in the U.S.

“Volatility in the equity markets is challenging deal execution,” says Scott Gehsmann, a capital markets partner in the PwC group.

The slow pace of new issues so far this year contrasts with 2007, when IPOS showed the highest activity since the peak of the tech and internet boom in 2000. In all of 2007, 296 IPOs generated $65.1 billion in proceeds, up from the 236 IPOs that raised $49.9 billion in 2006.

PwC noted that the turbulence in the credit markets did not seriously hinder IPO activity in the latter half of 2007. In fact, the fourth quarter showed 101 IPOs, making it the most active quarter in terms of IPO volume in the last eight years.

Among the key factors that drove 2007 IPO activity was the growth in Special Purpose Acquisition Company (SPAC) listings, which increased from 18 offerings raising $2.4 billion in 2006 to 49 IPOs raising $9.9 billion in 2007. SPACs are blind pools created to do unspecified deal.

SPAC volume represented about 17 percent of the total IPO volume and 15 percent of the total IPO proceeds, up from 8 percent and 5 percent, respectively, in 2006.

Indeed, in the first quarter of 2008, there already have been eight such deals raising $3.1 billion, according to PwC.

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