In the first quarter of 2013 there were 31 initial public offerings with $7.6 billion in proceeds. Five of the IPO’s were traditional technology IPO’s. The remainder were IPO’s sourced from leveraged buyout firms or spin-outs from larger companies.
Spinouts and recaps are classic bull market deals, as typically very little of the proceeds are had by the Company undertaking the offering. Instead, the funds are taken by the owners in the LBO firms, or the corporate parent. Yes, Virginia, we are in a Bull Market.
Zoetis was the largest IPO since Facebook at $2.58 billion. Zoetis (ZTS:NYSE) is the animal health unit of Pfizer (PFE-:YSE). The next largest was Norwegian Cruise Lines, NCL Corporation Ltd (NCLH:NasdaqGS), garnering $514 million. Others were Tri Pointe Homes LLC (TPH:NYSE) and Boise Cascade (BCC:NYSE).
Thirty-six companies priced above the range, which is the highest percentage since 2004. This contrasts with 2012 where 40 percent of the companies priced below the range.
The technology companies included ExOne Co. (XONE:NasdaqGM), Xoom Corp. (XOOM:NasdaqGS), Marin Software (MRIN:NYSE), Silver Spring Networks (SSNI:NYSE) and Model N (MODN:NYSE). Notably, Marin’s initial 11 to 13 price range was below that of the last round. Marin’s stock was priced at 14 and recently closed at 15.75 per share.
What does this tell us: Investors are hungry for new stocks and are willing to invest in the slower growth, but less riskly, LBO recaps. It’s a less frothy bubble. This past decade has seen large amounts of private equity flow into the market; these investors are hungry for liquidity. The venture capital pool has been shrinking, and more venture-backed companiers opt to be sold rather than go public (more on that in another post), and the requisite size is a major deterrent to going public.
It’s highly unlikely that Norwegian Cruise Line will have strong growth that will be substantially additive to the economy. However, we see a rising tide that will lift all ships, including technology. The tech companies that made it out are interesting and leaders in their fields: ExOne in 3D printing, and Xoom in mobile payments to cite two examples.
What was your favorite IPO of the quarter?