Healthy Start for IPOs Q1 2017 Middle Market Equity Capital Report
Following a year that can be characterized by sluggish IPO activity, 2017 is off to a strong start. At the conclusion of Q1 2017, 29 IPOs were issued compared to 10 in Q1 2016, signifying a 190% increase in IPO
activity year-over-year. Meanwhile, the proceeds raised from IPOs in Q1 of 2017 amounted to $12.8 billion in comparison to just $1.3 billion in Q1 of 2016.
($8.9 billion excluding Snap)
$1.3 billion
$441 million
($318 million excluding Snap)
2016
$130 million
Q1 IPO Count 2017
The success of these IPOs will drive activity through the rest of the year. In particular, we expect to see continued and robust activity in the technology sector. The market will continue to be selective, but good companies characterized by strong management, good growth, and solid financial metrics will continue to be funded.
2016
Mid-market management teams considering an IPO are more likely to issue an IPO if like companies have been successful doing the same.
$12.8 billion
Q1 Average Proceeds 2017
In a favorable IPO environment, the sheer number of middle market growth companies would suggest an accelerated level of IPO activity. The greater number of middle market IPO success stories; the greater number of future IPOs.
2016
Although Snap’s IPO and its hype took center stage in Q1 and overshadowed other IPOs such as Canada Goose and J. Jill, moving forward, we expect to see the most activity and growth among middle market IPOs.
Q1 Proceeds Raised 2017
While Snap’s debut on the New York Stock Exchange was met with much fanfare and delivered as most thought it would, it is still too early to tell if its IPO will be considered a success story among investors. Although the IPO met pricing expectations, it is now important to watch its post-IPO pricing performance as it adjusts to life as a public company.
29
10
We expect to see continued and robust activity in the technology sector. The market will continue to be selective, but good companies with a good story and strong technology will continue to be funded.
As we look ahead to Q2 and Q3, we expect to see an uptick in the number of middle market companies pursuing a dual-track strategy due to the continued availability of private capital and interest from strategic investors, along with favorable IPO market conditions. More companies may look to pursue a private transaction and an IPO simultaneously, selecting the option that yields greater benefits for the company and its shareholders.
2017 2016
Q1 Middle Market IPOs PROCEEDS $2.6 billion
$392 million
$173 million
$78 million
2017 2016
2017 2016
AVERAGE PROCEEDS
IPO ACTIVITY
15
5
Q1 Middle Market Follow On IPOs 2017
PROCEEDS $13.6 billion
2016
$6.5 billion
$76 million
2016
2016
2017
2017
$78 million
AVERAGE PROCEEDS
IPO ACTIVITY
175
85
Conclusion: Looking Forward The first quarter of 2017 saw a welcome increase in IPO activity and we expect the momentum to continue over the course of the year, especially now that some of the dust has settled surrounding the issue of interest
rates and we have a better sense of the general policy direction of the Trump administration. Under more favorable market conditions, companies that postponed or perhaps cancelled their IPO plans in 2016 may now be better positioned to pursue an IPO in 2017. Companies considering going public in the next year should pay close attention to Jay Clayton, the nominee to lead the Securities Exchange Commission, who has voiced support for rolling back regulations that may have contributed to reduced IPO activity in an effort to boost public markets. Look for some kind of incentive program to stimulate smaller (under $50 million in proceeds) IPO activity which has been languishing.
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Contact For more information, please contact Alex Castelli, Partner, National Liquidity and Capital Formation Advisory Group and Technology and Life Sciences Industry Practice Leader, at alex.castelli@cohnreznick.com or 703-744-6708.
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