U.S. IPO Market Recovers Somewhat but Still Lags Prior Years

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By Yin Wilczek

Oct. 12 — The U.S. initial public offering market recovered somewhat in the third quarter, bolstered by issuances from LINE Corp., Valvoline Inc. and others, but the amount of funds raised this year is still the lowest compared to the same periods over the last five years.

According to Bloomberg Law data, 101 IPOs priced in the first three quarters of the year, an 87 percent increase over the 54 that priced in the first two quarters. The total value of the IPOs for the three quarters was $17.3 billion, about a 90 percent increase from the $9.1 billion for the first two quarters.

Priced IPOs

Latham & Watkins LLP is the top law firm in terms of overall IPO count so far in 2016. The firm represented eight issuers this year, and served as counsel for 13 underwriters.

Deal attorneys say the recent strong performance may help persuade companies hoping to go public to do so in 2017.

“Obviously it was a strong September and it’s been a strong start to October” for IPOs, Cathy Birkeland, global co-chair of Latham & Watkins’ capital markets practice, told Bloomberg BNA. There also are a number of deals in the pipeline for the rest of the year, she said. “This bodes well for the IPO market in 2017.”

Law Firms
Trading Above Offer Price

Highlights for the third quarter include the issuance from Japanese message services provider LINE Corp. The IPO traded 26.7 percent above its offer price on the first day of trading and raised almost $895 million. The company said it plans to use the funds to bankroll acquisitions of content and technology.

Meanwhile, the IPO from Lexington, Ky.-based automotive lubricant manufacturer Valvoline priced within its offer range to raise $759 million. Also noteworthy is the offering from San Jose, Calif.-based software company Nutanix Inc. In late September, Nutanix's IPO traded 131.25 percent above its offer price on the first day of trading and raised almost $238 million.

In terms of industries, the Bloomberg Law data showed that the pharmaceutical industry had the most IPOs for the year, followed by the biotechnology industry. However, pharma IPOs have seen a steady decline in dollar value since 2013.

Life sciences issuers have led in the IPO space because there's just been an “explosion of technology,” Charlie Kim, global co-head of Cooley LLP's capital markets practice, told Bloomberg BNA. “It's been an exciting time for breakthrough technology and potential treatments.”

Kim said he is planning to get more technology deals done starting in the first quarter of next year. “Hopefully, we'll see more technology companies go out in 2017 than we have in the last couple of years,” he said.

According to Bloomberg Law data, Cooley is the top law firm for IPOs so far this year in the areas of biotechnology (five offerings), pharmaceuticals (six) and software (four).

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Susan Jenkins at sjenkins@bna.com

For More Information

Bloomberg Law IPO data is available to subscribers at https://www.bloomberglaw.com/product/corptrans/secondary_page/ct_ipo_market_update.

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