IPO Market to Stay Strong, Say Bankers

A recent survey shows investment bankers are optimistic about the second half of 2011.

Investment bankers are optimistic about initial public offerings for the remainder of the year, according to a recent survey of 100 bankers by accounting firm BDO USA. Nearly 60% expect the number of U.S. IPOs to increase in the second half of 2011, by an average of 9.5% over the number in the first half. Only 13% of bankers expect a decline.

This year has already been a fairly robust one for the IPO market, relatively speaking. Year-to-date, 75 IPOs have priced, according to Renaissance Capital, up from 60 at this point a year ago. And the dollar volume has nearly tripled, with $25.2 billion raised so far this year, compared with $8.8 billion as of last June. So far 151 companies have filed to go public in 2011, up 24% from 2010.

However, the rising tide may not lift all boats. While new-media companies such as LinkedIn and Pandora have received most of the hype, many of the larger IPOs have in fact been those of well-established firms that were backed by private-equity investors. One company in that category, hospital chain HCA Holdings, raised $3.79 billion; another, energy-pipeline firm Kinder Morgan, raised $2.9 billion. By contrast, LinkedIn raised $352 million in its debut. Bankers were most likely to cite the continued presence of such PE-backed firms as a reason they expect deal size to go up. Several, including Toys “R” Us and Dunkin Brands, have already filed to go public.

BDO IPO survey

“These are not necessarily new start-up companies,” says Wendy Hambleton, a partner in the capital markets practice of BDO USA. “Investors are looking for more stability and profitability.”

Indeed, venture capitalists, whose investments are often competing with PE-backed firms for equity-investor dollars, have a different take on the market. In another survey released at the same time as the BDO data, 87% of U.S. venture capitalists say they think the current level of IPO activity is lower than necessary to support the health of the venture-capital industry.

So far, technology has been the most popular industry for IPOs, a trend that is likely to continue. Energy companies also seem to have good support. The votes of confidence are most muted for companies in the consumer/retail and industrial/manufacturing industries.

 

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