Professor Raiton’s Inside Perspectives: Entrepreneurship, Creativity, Innovation

 The Strong IPO Market that Nobody’s Talking About 

During 2007, all of the talk about IPOs was that London and Hong Kong were stealing the New York IPO market’s thunder. But, with the largest number of IPOs and highest dollar volume since 2000, the 2007 U.S. IPO market performed well against the backdrop of the subprime and credit market crises. Driving the IPO market were fast growing Chinese companies in search of US capital and hot U.S. technology companies. Although IPOs were mostly immune from the problems of foreclosures, bad loans and deteriorating credits, the four largest issuers this year were financial companies, two of them money managers whose investments were potentially in these now contaminated realms of the credit markets. Technology continued its rebound, although performance was bifurcated, with sought after on-demand and virtualization software companies soaring and smaller names tanking.

Not all of the IPO action occurred in the US, however. The London Stock Exchange continued to attract European issuers, although many of its IPOs were smaller. But the LSE didn’t produce any global marquee names this year. Instead, the headline grabbing issuers were Chinese companies eschewing the New York exchanges for Shanghai and Hong Kong.

The 2007 was notable for the following:

• Highest volume and proceeds raised in seven years
• 2007 IPO first day pop and aftermarket returns were good but below 2006
• The Renaissance IPO Index® significantly outperformed the major indices
• Largest issuers were financials, which had disappointing debuts
• The majority of top performers were Chinese IPOs
• Stop the presses! Worst performers weren’t mostly biotech
• Tech IPOs were the largest component of the calendar, followed by healthcare
• Establishment of Hong Kong and Shanghai as hubs for hot IPOs
• Non-US exchanges Woo IPOs
• International activity, lead by China, continued to be strong
• Tremendous demand for small, high growth companies
• More Profits on the Come as Tech Deals Dominated
• Our predictions for 2008 are offered

Highest Volume of IPOs and Proceeds in Seven Years

Deal volume was up 16% and proceeds raised increased 23% over 2006. The average market capitalization of IPOs rose as well, due to a continuing number of megadeals as well as investor preference for companies with credible track records.

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