ey2014 was a very strong year for IPOs globally, but in the U.S., where there were more IPOs this year than any year since 2000, this was an “exceptional” year, according to the latest quarterly global IPO report from accounting and consulting firm EY. The report, entitled “EY Global IPO Trends: 2014 Q4” can be found here. EY’s December 10, 2014 press release about the report can be found here. The report details not only IPO activity in the U.S. during 2014 but in all major financial markets throughout the world.


According to the report, there were 288 IPOs completed in the U.S. during 2014 (through December 4, 2014, inclusive of deals expected to close by year’s end), which represents an increase of 27% over 2013 (when there were 225 IPOs) and also represents the highest number of U.S. IPOs since 2000, during the Internet boom years. The U.S. IPOs raised around $95 billion, which, according to the report represents “new high.” By way of contrast, during the 2013 U.S. IPOs raised about $62 billion. IPO activity in the U.S. remained strong throughout the year, with an average of 24 deals a month despite some brief volatility in October.


The U.S. financial markets of course are competing in a global marketplace for offerings, and in that respect it is particularly important to note that non-U.S. companies completed 67 IPOs on U.S. exchanges during 2014, which represents more foreign IPOs than any other market and accounts for 52% of all cross-border deals globally. The non-U.S. companies raised $40.8 billion, which represents 81% of all capital raised in cross-border transactions. The cross-border IPO activity in the U.S. during the year represented the highest levels since 2007. The cross-border deals originated in a number of countries, including China (16 IPOs); Europe (26 IPOs, of which 8 were from the UK); and Israel (8 IPOs).


The report notes that a number of factors support this cross-border activity in the U.S., which is likely to continue in 2015; the report notes that “growing familiarity with U.S. accounting regulations, the strength of the U.S. markets and access to capital – together with the success of the Alibaba IPO – are likely to encourage more cross-border IPOs on U.S. exchanges going forward.”


Continuing a trend started in 2013, the leading sector for U.S. IPOs was the health care sector, which accounted for 111 deals, or 39% of all IPOs during the year as a whole. Within this sector, pharmaceuticals and biotechnology have been “particularly noteworthy,” with many companies in those sectors taking advantage of JOBS Act provisions in connection with their initial offerings. Technology 47 deals), financials (29 deals) and energy sectors also feature strongly in the 2014 deal activity.


The report’s authors predict a strong start for U.S. IPOs in 2015, based on a “combination of low volatility, strong investor confidence and a robust pipeline with more than 100 companies getting ready to list.” The report predicts that around 60 companies will go public in the U.S during the first quarter of 2015, raising an estimated $22 billion. The report contains a number of comments to the effect that concerns that the IPO market in the U.S. may be in a 2000-like bubble are overblown. The companies that are coming to market continue to be substantial operations with longer operating histories.


Some interesting statistics from the report with respect to the 2014 U.S. IPOs: 116 of the 2014 IPO deals were listed on NYSE, 172 on NASDAQ. The average first-day return for the 2014 U.S. IPOs was 19.3%, and the increase over the offer price through December 3 for those IPOs was 27.8%. By way of contrast, during the same period the S&P 500 index was up 12.2%. The median post-offering market cap for the 2014 U.S. IPOs was $390 million. PE and VC backed deals accounted for 63% of the 2014 U.S. IPOs and also accounted for 72% of the proceeds.


To put the U.S. IPO volume in a global perspective, the 288 IPOs completed in the U.S. during 2014 that raised US$95.2 billion compare with 87 in Hong Kong (raising U.S$30 billion); 75 in Australia (US$16 billion); 76 in Shenzen (US$5.8 billion); 40 on the London Stock Exchange (Main Market) ($19.4 billion); and 72 deals on the London AIM ($4.2 billion).


The level of IPO activity globally is obviously a positive sign as it not only represents both impressive levels of economic activity but also demonstrates the health of the global financial markets. The significant numbers of IPOs on U.S. exchanges during 2013 and 2014 are particularly significant, as they mean that the number of companies listed on U.S. exchanges is actually increasing for the first time in many years, as I noted in an earlier post. Since the early 90s, a combination of bankruptcies, mergers and going private transactions, as well as competition from the other financial markets, has meant that the number of U.S. listed companies has been steadily declining. It is good to see such a significant number of companies seeking new listings in the U.S, particularly given that about 23% of the new listings during 2014 involved companies domiciled outside the U.S.  


There aren’t many down sides to this story, but if there is one concern worth noting it is that an increase in IPO activity will almost certainly translate into an increase in IPO-related securities litigation, as I also noted in an earlier post (here). Indeed, of the 160 new securities class action lawsuits filed so far during 2014, 16 of them (10%) have involved IPO companies, many of them only having just completed their IPOs in 2013 or 2014. It is worth noting that of the 16 IPO related securities suits filed so far this year, 11 of them were filed in the year’s second half, suggesting (as might be expected) that the IPO-related securities litigation picked up as the year progressed. Given the lag time between the date of an UPO and the date of a securities suit filing, and given the increase in IPO activity, we should expect to see IPO related securities litigation continue to increase in 2015.


One interesting note in the report was the suggestion that the IPO activity in the U.S, and in the health care sectors, can be attributed in part to the IPO on-ramp provisions in the JOBS Act. This is an observation that others have made, along with the observation that many of the non-U.S. companies listing on the U.S. exchanges are also taking advantage of the JOBS Act provisions. My detailed discussion of the effect of the JOBS Act provisions on IPO activity can be found here.