American IPOs to reach $66 bn in 2014

Survey of investment executives predicts 9 percent growth in new US listings

The majority of US executives in the investment business expect IPOs in the country to increase in both volume and individual value, according to a new study.

Carried out by accounting and consulting firm BDO, the study finds 63 percent of executives at several US investment banks predict an increase in IPO activity, with 27 percent forecasting the same activity levels seen in 2013. Just 9 percent of those surveyed expect a decrease in new offerings on domestic exchanges.

On average, bankers predict a 9 percent increase in the number of US IPOs in the coming year. With each new listing having an anticipated average value of $237 mn, total IPO proceeds on US exchanges could hit $66 bn by the end of 2014, if these predictions are accurate.

Wendy Hambleton, a partner at BDO, says the survey’s findings reflect the ‘renaissance’ in IPO activity seen in 2013, a year that saw the highest volume and value of IPOs in the US since 2000.

‘Perhaps most impressive is that this performance was accomplished without the benefit of a Visa, GM, Facebook or other major offering to pump up proceeds,’ Hambleton adds. ‘Investor optimism has finally rebounded from the financial crisis, and the investment banking community is predicting even more deals and higher proceeds in 2014.’

Executives were also asked to identify the most important factor that might drive an increase in IPO activity. Three factors are consistently chosen by around 25 percent of respondents: continued low interest rates, increased confidence in the US economy and previous positive IPO performance encouraging more businesses to list. Others cite increased cash flow into stock-focused mutual funds (12 percent) and the beneficial effect of the JOBS Act (8 percent).

On the other hand, 43 percent of bankers say the Federal Reserve’s decision to scale back monetary stimulus to the IPO market is the greatest threat to any expected success. Almost a quarter (24 percent) say the persistent effects of political and financial instability around the world still threaten any new listings, along with tax increases (13 percent) and high unemployment (8 percent).

Such predictions are consistent with PwC’s outlook for 2014: the financial services firm reported in December that the total proceeds of 2013’s IPOs reached $56.8 bn and that any momentum in new issuances would carry forward to 2014.

‘Driven by increasing investor appetite for growth companies, low volatility and strong equity markets, the field of IPOs has continued to broaden across industry sectors,’ said Henri Leveque, leader of PwC’s US capital markets and accounting advisory services, at the time. ‘We expect the new issuance window to remain open as we head into 2014.’

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