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Aug 07, 2013

Tips for a bumper crop of IPOs

The NYSE, a banker, a lawyer and others list the do’s and don’ts for soon-to-be-public companies

The IPO market usually takes a snooze in the dog days of August. Not this year. The US is on track to have the most IPOs during this summer month since August 2007, when 16 were launched.  

‘It’s a fantastic year for IPOs,’ declared investment banker Robert Fuchs on yesterday’s IPO boot camp webinar, entitled ‘Ready, set, IPO’. The Sunrise Securities banker cited 116 IPOs already in 2013, up 35 percent from last year.

Carolyn Saacke, managing director in NYSE Euronext’s capital markets group, added that nine IPOs are pricing in the US this week alone, with five of them planning to launch on the NYSE on Friday, making it the busiest Big Board listing day in years. 

Fuchs ran down the factors driving the high volume of IPOs, including a significant rise in the Dow combined with a lot of PE-backed firms looking to take advantage of it. Plus, even at historic highs, the stock market has been a lot less volatile than in recent years.

There is also a concern that if interest rates move up or the Fed backs off on bond buying then the market will level off, so people want to get deals done sooner rather than later.

The search for yield has also pulled more companies into the public markets. ‘The yield equation has sparked tremendous demand for dividend-paying companies,’ Fuchs said.

‘Part of the strength in the IPO market can be attributed to the tremendous backlog in supply since the market essentially shut down in the financial crisis,’ Fuchs went on.

The price is right

So the time is right to go public. How is the bumper crop of IPOs faring? Saacke said pricing overall has been much better than in the past. In 2011 IPOs usually priced at the low end of their range or even below it. In 2012 the median return on IPOs was 30 percent – a high number reflecting fairly conservative pricing. Now in 2013 IPOs are generally pricing from the mid-point to upper end of their range.

Saacke also pointed out that 98 of this year’s IPOs have taken advantage of some aspect of the JOBS Act, for example submitting confidential draft registration statements to the SEC. The NYSE expects the JOBS bandwagon to continue to attract emerging growth companies to the public market.

In contrast to 2012, when a lot of venture capital-backed firms stepped up to go public, 2013 has seen more private equity-backed companies doing IPOs – ‘Big, branded, well-performing companies like SeaWorld, Pinnacle Foods and Norwegian Cruise Line,’ enumerated Saacke. 

As the topic turned into how to prepare for an IPO, moderator Gene Marbach wrangled five more speakers into the busy discussion, including Karl Deonanan, head of IR at Quintiles, which listed on the NYSE in May, and Keith Gottfried, partner at law firm Alston & Bird, who both alarmed prospective IPOs with a list of pitfalls and thrilled them with the benefits of being public.

Marc Drechsler, head of financial communications at Ketchum, said to start acting like a public company well in advance of an IPO, setting precedents and establishing the story-telling process.

Darrell Heaps, CEO, Q4 Web Systems, backed up Drechsler with advice on creating a website with features of a full-blown IR site like a built-out newsroom and CEO videos. Jeff Corbin, CEO of KCSA Strategic Communications, sparked interest in the audience when he suggested privately doing mock earnings calls in the quarters leading up to an IPO. and Onstream Media have two webinars in their IPO bootcamp series. Yesterday’s is available on demand and next Wednesday they’ll do ‘The IPO and beyond’, looking at life after going public. Use this link to register for both. Also search Twitter for #readysetipo.