Initial public offerings are on the rebound. All together, 27 IPOs raised $4.1 billion in the first quarter of 2010, up from a paltry two deals worth a total of $700 million in the same period last year, according to research PricewaterhouseCoopers released Wednesday.
That represents strong growth of nearly six times the dollars raised, and 13 times more deals, as in the first quarter of 2009. It still falls short of the $22.6 billion that 25 IPOs raised in the first quarter of 2008, but that total was skewed by the largest IPO in U.S. history, the $17.9 billion offering of credit giant Visa (V).
Signs of a Strong Comeback
One good sign is that the IPOs were spread across a number of different industry sectors, including seven deals in financial services; four each in industrial products, health care and technology; three deals in transportation; and two in energy. "The diversity of industry sectors contributing to the increasing deal flow is a validation of the recovery of the U.S. IPO market," Scott Gehsmann, a capital markets partner with PricewaterhouseCoopers' Transaction Services practice, said in a press release.
More good news? The IPO comeback appears to be gaining steam, with more deals in the works. At least 36 IPOs that have been priced to hit the market this year, according to IPO research and investment firm Renaissance Capital of Greenwich, Conn., and experts anticipate more activity on the way. In fact, capital markets have improved so much that even bailed-out General Motors has indicated it may issue an IPO later this year.
So far, "reasonably priced deals" from well-prepared issuers have been successful, Gehsmann says, adding that a strong first quarter is "a promising sign" for continued growth throughout the rest of 2010.
But what constitutes "reasonably priced" in the current economic environment? The average IPO in the first quarter raised $160 million, according to Renaissance Capital. The largest deal of the quarter was Sensata Technologies's (ST) IPO, which raised $569 million in March. Priced at $18 each, shares of the sensor-control-technology developer grew to $19.04, showing a 5.8% return at the end of the first quarter.
Renaissance Capital also revealed which IPOs have had the highest returns so far this year: Citigroup (C) spinoff Primerica (PRI) has already soared 66.3% to $25.12 per share from $15 per share at its March 31 debut. Retirement plan advisor Financial Engines (FNGN) has grown 43.5% since March 15, jumping to $16.96 per share from $12 per share. Hospitality company China Lodging Group (HTHT) is up 29.1% to $15.08 per share from its March 25 offer price of $12.25 per share; wireless network operator Meru Networks (MERU) has climbed 23.4% to $18.58 per share from $15 per share at its March 30 offering; and semiconductor chip designer MaxLinear (MXL) has increased 20.8% to $17.51 per share from its March 23 offer price of $14 per share.
IPOs that haven't fared as well include crude oil transporter Crude Carriers (CRU), which has fallen 8.3% since its offering; metal processing firm Metals USA Holdings (MUSA), which is down 7.6%; and international cargo carrier Baltic Trading Limited (BALT), which has declined 5.4%.
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