The swift pace of the 2014 IPO market ebbed in August. The month produced only seven IPOs, one-third of the monthly average of 21 IPOs over the preceding 12 months.
While the August 2014 IPO count was well below the recent monthly pace, the seven IPOs still represented an August monthly total higher than all but five of the 13 years since the end of dot-com boom in 2000.
August’s modest activity brings the count for the first eight months of 2014 to 169 IPOs, two-thirds above the 101 IPOs in the first eight months of 2013 and only nine IPOs below the tally for all of 2013.
Gross proceeds in August were $604.8 million, the first month since February 2013 with monthly proceeds below $1 billion. The August figure brings total gross proceeds for the first eight months of 2014 to $36.2 billion, or 61% above the $22.5 billion raised by IPOs in the first eight months of 2013.
The percentage of IPOs by emerging growth companies (EGCs) has continued to climb, reaching 88% of IPOs in the first eight months of 2014, compared to 82% in 2013 and 76% in the portion of 2012 that followed enactment of the JOBS Act.
Overall, broadly-defined technology and life sciences companies have accounted for 72% of the year’s IPOs, up from 59% over the prior three-year period and representing the highest annual percentage since 2000.
The median IPO offering size declined 15% from $107.4 million in full-year 2013 to $91.0 million in the first eight months of 2014—the lowest yearly figure since the $89.3 million median offering size in 2004. The median deal size for VC-backed companies in the first eight months of 2014 was $71.3 million, 9% below the $78.3 million for full-year 2013 and the lowest level since the $52.5 million median in 2005. The median offering size for life sciences IPOs declined from $68.6 million for full-year 2013 to $56.0 million over the first eight months of 2014. At $485.9 million, the median IPO offering size for non-EGCs is almost six times the $82.5 million median IPO offering size for EGCs.
The median annual revenue for IPO companies fell from $133.6 million in 2012 to $89.9 million in 2013 and fell further to $62.0 million in the first eight months of 2014—the lowest level since 2000. The percentage of profitable IPO companies declined from 55% in 2012 to 43% in 2013 and declined further to 35% in the first eight months of 2014. Both measures have been drawn down by the large number of life sciences company IPOs in 2014. Median annual revenue among life sciences IPO companies year-to-date is only $1.2 million and just 15% were profitable.
The average IPO company in 2014 ended its first day of trading with a 15% gain—below the average first-day gain of 21% for IPOs in all of 2013 and just shy of the 16% gain in 2012, but still the fourth highest annual average gain since 2000. The IPO market, however, remains selective with positive first-day returns far from guaranteed. Year-to-date, 26% of IPOs were “broken” (closing below the offering price on the first day)—above the 22% of broken IPOs in 2013 and representing the third highest figure in the last 15 years.
The average 2014 IPO company ended August 18% above its offering price although performance was mixed across sectors. The average 2014 life sciences IPO company ended the month with a 10% gain from its offering price compared to a 24% gain for all other 2014 IPO companies. The average venture-backed non-life sciences IPO company in 2014 enjoyed a gain of 31% from its offering price through the end of August.
Year-to-date after-market performance has been more muted. In the first eight months of 2014, the average IPO company gained only 4% from its first-day closing price through the end of August, with life sciences companies posting an average decline of 1%. At August month-end, 36% of all 2014 IPOs were trading 25% or more above their offering price and an equal percentage were trading below their offering price, with 44% of all 2014 IPOs trading below their first-day close.
Despite the traditional pause around the Labor Day holiday, the IPO market is far from moribund. With the stock market at record highs and a number of prominent IPO candidates waiting in the wings, the coming months should be primed for strong offering activity.
IPO activity in August consisted of offerings by the following companies listed in the order they came to market:
- Auris Medical Holding, a clinical-stage biopharmaceutical company focused on the development of novel products for the treatment of inner ear disorders, priced at the expected price and ended its first trading day flat.
- iDreamSky Technology, the largest independent mobile game publishing platform in China, priced above the range and gained 6% on its first trading day.
- T2 Biosystems, an in vitro diagnostics company that has developed an innovative and proprietary technology platform that offers a rapid, sensitive and simple alternative to existing diagnostic methodologies, priced an IPO upsized by 30% below the range and produced a first-day gain of 30%.
- Independence Contract Drilling, a provider of land-based contract drilling services for oil and natural gas producers targeting unconventional resource plays in the United States, priced at the top end of a downwardly revised price range and edged up less than 1% in first day trading.
- Ryerson Holding, a processor and distributor of metals in North America, priced at the low end of the range and declined 6% in first-day trading.
- Otonomy, a clinical-stage biopharmaceutical company focused on the development and commercialization of innovative therapeutics for the treatment of diseases and disorders of the ear, priced an IPO upsized by 17% at the top end of the range and produced a first-day gain of 7%.
- C1 Financial, a Florida-based commercial bank, priced below the range and ended its first trading day flat.