Despite Growth, U.S. on Track to Only Complete
280 IPOs in 2014, Far Behind Economic Potential, According to New Report
by CohnReznick LLP
While the absolute number of IPOs in 2014 is higher than in recent
years, it is still less than half of what supported the U.S. economy
before the dot com bubble, according to the report. It has been
estimated that the U.S. should now be doing more than 900 IPOs a year
based on this larger economy of which 80% should be less than $80
million in size.
The report revealed that there were more corporate IPOs in Q2 (74)
than there were in Q1 (66), and there were more corporate IPOs (140)
through the first half of 2014 compared with the first half of 2013
The number of sub $50 million IPOs decreased to 10 in Q2, representing
only 13% of all corporate IPOs transacted for the quarter and
emphasizing the need for additional forms of capital stimulation for
the lower middle market.
The number of IPOs transacted by middle-market companies (companies
with market caps of $100 million to $1 billion) was flat from Q1 to
Q2. There were 47 IPOs in each of the first two quarters of 2014.
Healthcare and technology remain prominent sectors for middle-market
financing activity, representing almost 76% of Q2 Corporate IPOs and
56% of follow-on transactions. This has a particularly large ripple
effect on the economy since economists estimate that as many as five
local service sector jobs ranging from doctors and teachers to wait
staff and sales clerks, are created for every one technology and
biotechnology sector job produced.
The number of investment banks underwriting sub $50 million IPOs has
decreased by 84% from 20 years ago. In 2013-4, only 27 investment
banks participated in sub $50 million IPOs. While in 1993-4, 166
investment banks participated in sub $50 million IPOs.
NEW YORK--(BUSINESS WIRE)--
Despite their recognized value as economic engines, the number of
Initial Public Offerings (IPOs) in the United States, although improving
over the first two quarters of 2014, is far from the number required to
accelerate growth in the middle market, according to new research
released today and commissioned by CohnReznick
LLP, a top ten accounting, tax, and advisory firm dedicated to helping
middle-market companies with liquidity events and capital formation. The
U.S. is on track to do only 280 corporate IPOs in 2014, less than one
third of the total number that researchers estimate should be completed,
based on GDP growth, to support the broader economy.
“With 74 Corporate IPOs completed in Q2, the conventional wisdom is that
the IPO market has re-established itself in the aftermath of the
recession as the JOBS Act and an improving economy ease the process of
raising equity capital,” said Dom Esposito, Partner and National
Practice and Growth Director at CohnReznick. “The reality is that the
U.S. must do better, and has historically performed better, at
encouraging IPO activity in order to better fuel economic and job growth.
“Structural market changes such as decimalization have contributed to an
IPO Gap, particularly in the middle market. The results of a recently
announced SEC pilot program testing the impact of increased tick size on
less liquid and smaller capitalized stocks will be closely watched to
gauge its value in stimulating middle-market IPO activity,” Esposito
According to the report:
The full study and research will be released later this month and will
be available at www.cohnreznick.com/capitalformation.
With origins dating back to 1919, CohnReznick LLP is the 10th largest
accounting, tax, and advisory firm in the United States, combining the
resources and technical expertise of a national firm with the hands-on,
entrepreneurial approach that today's dynamic business environment
demands. CohnReznick serves a large number of diverse industries and
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Headquartered in New York, NY, CohnReznick serves its clients with more
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of Nexia International, a global network of independent accountancy,
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Sabrina Strauss, 212-576-2700
Source: CohnReznick LLP