2017 IPOs Are Larger and Faster

By Yelena Dunaevsky, Bloomberg BNA

The number of deals in the first three quarters of 2017 increased by 12 percent and the dollar amount of funds raised jumped by 39 percent, compared to full year 2016.

One-hundred and sixty IPOs priced in the first three quarters of 2017, raising $36.9 billion and surpassing full year 2016 numbers in deal count (143) and dollar amount raised ($26.5 billion).

The average deal size in the first three quarters of 2017 was $231 million, up by 25 percent from $185 million in 2016 and by 22 percent from $189 million in 2015.

US Priced 2017Q3

 

Deal Size Is Increasing

In the first three quarters of 2017, a larger percentage of IPOs were in the $100 – $500 million range and a smaller percentage of IPOs were in the $1 – 100 million range compared with the previous four years, indicating a trend towards larger-sized deals.

Out of 160 IPOs in the first three quarters of 2017, 42, or 39 percent, were in the $1 – 100 million range by offer size, 55, or 51 percent, were in the $100 – $500 million range, 7, or 7 percent, were in the $500 million – $1 billion range and 4, or 4 percent, were in the $1 – $10 billion range.

 

Big Players

The three largest IPOs of the first three quarters of 2017 were by: Snap Inc. (priced on March 1 and raised $3.91 billion), Altice USA Inc. (priced on June 21 and raised $2.15 billion) and Invitation Homes Inc. (priced on January 31 and raised $1.77 billion).

 

Filing to Pricing Is 25 – 30 Percent Faster

IPO Timing 2017Q3

 

The average time to completion decreased by 25 percent for emerging growth company (EGC) IPOs, 27 percent for all IPOs and 30 percent for non-EGC IPOs from 2016, compared with the first three quarters of 2017. On average, in the first three quarters of 2017, EGCs took 72 days to complete an IPO (from date of first filing to pricing date). The average for all companies was 78 days and the average for non-EGCs was 103 days.

In the first three quarters of 2017, non-EGCs took 61 percent less time to complete their IPOs than they took at the peak of 2015 (265 days). All IPOs took 33 percent less time to complete than at the peak of 2013 (117 days). However, EGC IPOs took 16 percent more time to complete than at the low of 2013 (62 days).

 

The IPO Pipeline Is Heating Up

 

US Announced 2017Q3

 

The announced deal value of $40.30 billion in the first three quarters of 2017 surpassed by 26 percent the announced deal value of IPOs in all of 2016 ($31.92 billion). Two-hundred and seventeen IPOs were announced in the first three quarters of 2017, only 12 percent lower than the number of announced IPOs in all of 2016 (243 IPOs).

 

Top Industry Sectors Are Changing

Industry Sectors 2017Q3

 

In the first three quarters of 2017, the Diversified sector replaced the Technology sector among the top three sectors by number of IPOs (24 IPOs). IPOs in the Diversified sector also raised the most capital ($7.6 billion), due largely to two large IPOs in this sector by: Snap Inc. ($3.91 billion raised) and Altice USA Inc. ($2.15 billion raised).

The Consumer, Non-Cyclical sector was the most active sector with 42 IPOs that raised $4.0 billion. As in the previous four years, in the first three quarters of 2017, the Financial and Consumer, Non-Cyclical sectors outperformed the other industry sectors by number of IPOs.

The top IPOs by dollar value in each of the three top sectors in the first three quarters of 2017 were by: Laureate Education Inc. (Consumer, Non-Cyclical sector, priced on January 31 and raised $490 million), Invitation Homes Inc. (Financial sector, priced on January 31 and raised $1.77 billion) and Silver Run Acquisition Corp. II (Diversified sector, priced on March 23 and raised $1.04 billion).

 

SPACs Are on the Offensive

SPACs 2017Q3

 

The dollar amount raised by special purpose acquisition company (SPAC) IPOs in the first three quarters of 2017 jumped by 114 percent from full year 2016 ($3.48 billion) and by 91 percent from full year 2015 ($3.90 billion).

Twenty-two SPAC IPOs priced in the first three quarters of 2017 and raised a total of $7.46 billion, surpassing the peak of dollar amount raised by 43 SPAC IPOs in 2007 ($7.29 billion). In the first three quarters of 2017, SPACs represented 14 percent of the total IPO market by deal count and 20 percent of the total IPO market by dollar amount raised. After the peak of 2007, the worst year for SPAC IPOs was 2009, but SPACs have been on an upward trend since 2009 in both deal count and dollar amount raised.

The three largest SPAC IPOs of 2017 were by: Silver Run Acquisition Corp. II (priced on March 23 and raised $1.04 billion), Social Capital Hedosophia Holdings Corp. (priced on September 23 and raised $690 million), and TPG Pace Energy Holdings Corp. (priced on May 4 and raised 650 million).

 

Law Firm Performance

Cooley did the most sector-specific deals (15 IPOs) in the Consumer, Non-Cyclical sector, in the first three quarters of 2017. In the Diversified sector, Ellenoff Grossman & Schole led with 11 IPOs that raised a total of $2.10 billion, but Weil Gotshal & Manges participated in six IPOs that totaled $3.55 billion. Venable led the Financial sector with seven IPOs that raised a total of $2.76 billion. The Industrial sector was dominated by Latham & Watkins and Simpson Thacher & Bartlett, while the Technology sector was led by Wilson Sonsini Goodrich & Rosati.

Goodwin Procter (advising the underwriters) and Cooley (advising the issuer), participated in the largest IPO of the first half of 2017, the Snap Inc. IPO, which priced on March 1 and raised $3.91 billion. Ropes & Gray (advising the underwriters) and Shearman & Sterling, Mayer Brown and Jenner & Block (advising the issuer) participated in the second largest IPO of the first half of 2017, the Altice USA Inc. IPO, which priced on June 21 and raised $2.15 billion.

For more information on U.S. and European IPO performance, Bloomberg Law subscribers can access the Quarterly IPO Market Update – U.S. and the Quarterly IPO Market Update – Europe in the Securities Practice Center.