IPO Market stalls in Second Quarter Despite Largest Venture-Backed Offering on Record
Aggregate M&A Value Increases 55% from First Quarter 2012
New York – Venture-backed initial public offering (IPO) activity marked its strongest quarter on record, by dollars raised, bolstered by the record-breaking offering from Facebook Inc in May. By number of deals, 11 venture-backed companies went public in the United States during the second quarter of 2012, a decline of 42 percent from the first quarter of this year and down 50 percent from the second quarter of 2011, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). For the second quarter of 2012, 102 venture-backed M&A deals were reported, 27 of which had an aggregate deal value of $5.5 billion, a 61 percent increase from the first quarter of 2012.
"There's no question that the psychological fallout from the Facebook IPO, coupled with economic uncertainty in Europe, put a chill on the public markets for most of the second quarter," said Mark Heesen, president of NVCA. "However, as the world was fixated on a single offering, many companies were simultaneously registering confidentially to go public under the new JOBS Act provision, building an IPO pipeline that started to flow in the final days of June. This backlog, coupled with an ongoing healthy acquisitions market, suggests that 2012 can still be strong for venture-backed exits, if the public markets stabilize and remain open fully for the rest of the year."
IPO Activity Overview
There were 11 venture-backed IPOs valued at $17.1 billion in the second quarter of 2012, which, powered by Facebook Inc's $16.0 billion offering, marked the largest quarter for dollars raised by venture-backed companies on record. By number of deals, quarterly volume fell 42 percent from the first quarter of this year and 50 percent from the second quarter of 2011.
Nine of the 11 IPOs of the quarter were IT-related IPOs representing 82 percent of the total issues for in the quarter. By location, all of the quarter's 11 IPOs were by U.S.-based companies with eight coming from the state of California, two from Massachusetts and one from Maryland.
In the largest IPO of the quarter and the largest venture-backed IPO on record, Facebook Inc (FB), an online social network based in Menlo Park, California, raised $16.0 billion and began trading on NASDAQ on May 18th.
For the second quarter of 2012, eight companies listed on the NASDAQ stock exchange and three companies listed on the New York Stock Exchange.
Nine of the 11 companies brought to market this quarter are currently trading above their offering price. There are 44 venture-backed companies currently filed for an initial public offering with the SEC. This figure does not include confidential registrations filed under the JOBS Act.
Mergers and Acquisitions Overview
As of June 29th, 102 venture-backed M&A deals were reported for the second quarter of 2012, 27 of which had an aggregate deal value of $5.5 billion. The average disclosed deal value was $205.2 million, a 55 percent increase from the first quarter of 2012.
The information technology sector led the venture-backed M&A landscape with 77 of the 102 deals of the quarter and had a disclosed total dollar value of $2.6 billion. This was an increase of 24 percent from the first quarter of 2012. Within this sector, Computer Software and Services and Internet Specific deals accounted for the bulk of the targets with 36 and 23 transactions, respectively, across these sector subsets.
The largest venture-backed M&A deal of the second quarter was Amazon.com's $775 million acquisition of Kiva Systems, a North Reading, Massachusetts-based maker of automation technology systems for distribution centers.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 52 percent of the total disclosed transactions during second quarter of 2012, down slightly from the first quarter of this year. Venture-backed M&A deals returning less than the amount invested accounted for just 11 percent of the quarterly total.
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About National Venture Capital Association
Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. According to a 2011 Global Insight study, venture-backed companies accounted for 12 million jobs and $3.1 trillion in revenue in the United States in 2010. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, NVCA serves as the definitive resource for venture capital data and unites its more than 400 members through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.
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