Older registrants that went public in Q2, but were no longer noted in the Pipeline study because they stayed in registration for over 12 months, included: Solar Winds (15 months in registration); LogMeIn (17 months in registration); Digital Globe (13 months in registration). Conversely, China-based Duoyuan Global Water entered the pipeline on June 1 and went effective within the month.
"As market activity begins to build, we'll see the patient registrants finally go public, and new registrants come on if they believe they can move ahead in this market," says Maria Pinelli, Ernst & Young LLP's Americas Director of Strategic Growth Markets. "Clearly, China-based companies are seeing opportunity in this market. Among the four new Q2 registrants from the greater China area, three have already gone effective."
New registrants represent a total of $571.7 million of capital to raise (an average of $71.4 million per company), up significantly from $162.1 million in Q1 (an average of $54.0 million per company). Yet overall, the 28 companies remaining in the pipeline represent $7.6 billion, down from $11.7 billion in Q1.
"Deal size has actually increased by about 41 percent since last year. We may also see an increase in carve-outs, as companies seek to take advantage of what seems to be market momentum with well-established business brand names," says Jackie Kelley, Ernst & Young LLP's Americas IPO Leader.
Technology companies continue to lead the pipeline with five registrants representing $2.05 billion. Two of these entered the pipeline in Q2, namely Changyou.com Ltd, which represents the largest new registrant at $138.0 million, and ZST Digital Networks Inc. Diversified industrial products follows technology with four IPOs in the pipeline totaling $1.45 billion in registration. Other industries with new registrants included: diversified industrial products, chemicals, oil and gas operations, banking and capital markets, property and casualty insurers, and water and sanitation services.
Greater China's level of activity in the US markets is reflected in the five deals in the pipeline, on par with the number of deals from key US regions, the Pacific Southwest and the Northeast. Within the US, IPO registrants are widespread, with two deals each in six different states. However, Wyoming stands out as the single largest dollar amount, with $1.0 billion in registration for Cloud Peak Energy Inc. Wisconsin follows with two registrants totaling $900.0 million.
The Ernst & Young LLP U.S. IPO Pipeline Report is issued quarterly as a forward-looking indicator of the IPO market. The IPO Pipeline data is refined to eliminate bias from financial services organizations, real estate investment trusts and other holding companies that represent assets under management instead of core businesses. It also eliminates any registrants sitting on the books for more than 12 months - long-term applicants that may bloat numbers, but don't reflect current market trends.