U.S. IPOs Start Year Strong; Energy & Tech Show Promise

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By Michael Greene

Snap Inc. and other stock issuances from the first quarter may signal that the U.S. initial public offering market is rebounding.

Thirty-seven companies priced IPOs and raised $14.12 billion in the first quarter of 2017, according to Bloomberg Law data. In the first quarter of 2016, only 14 companies priced IPOs and raised $1.44 billion.

The strong start to 2017 was bolstered by the three largest IPOs of the quarter—Snap ($3.91 billion), Invitation Homes Inc. ($1.77 billion) and Silver Run Acquisition Corp. II ($1.04 billion).

“We had a relatively busy first quarter and expect IPO activity to remain steady throughout the year,” David Palmer Oelman, a Houston-based partner at Vinson & Elkins LLP who co-heads his firm’s Mergers & Acquisitions and Capital Markets practice group, told Bloomberg BNA. He said his firm currently is working with about 10 companies that have filed public registration statements and with more than twice that number that are in other stages of developing their initial offerings.

Oelman said his firm, which does a lot of work in the energy sector, is seeing an increased number of energy deals in its pipeline.

Many oilfield services companies are looking to access the market as they recover from the downturn in commodity prices, he said. As the year progresses, “I expect there to be a broader mix of companies.”

Energy IPOs in 2017

The financial sector was the top performing industry of the quarter in terms of deal numbers (nine deals, raising $3.2 billion). Next was the consumer, non-cyclical sector (eight deals, raising $0.9 billion) and then, the energy sector (five deals, raising $1.6 billion).

The first quarter saw increased activity in the energy sector, which hasn’t been in the top three by deal count since 2014, when there were 26 deals that raised $12.9 billion throughout the entire year.

Will Tech Rebound?

The question remains whether 2017 will see the comeback of tech IPOs.

There were three tech IPOs during the first quarter of this year raising about $662 million. Successful tech IPOs of the quarter included MuleSoft Inc. and Alteryx Inc., which raised $221 million and $145 million, respectively.

Snap, the Los Angeles-based disappearing photo app developer, had the largest IPO of the first quarter. (Bloomberg Law categorizes Snap as a communications company.)

During the first quarter, technology IPOs priced well and performed well after their trading debuts, which will encourage other tech companies to go public, Richard Kline, a Silicon Valley-based partner at Goodwin Procter LLP, told Bloomberg BNA.

The tech companies expected to go public this year include big-data company Cloudera Inc., which is aiming to raise as much as $210 million in its IPO.

“I think you will see a steady flow of technology companies looking to access the market throughout the year,” said Kline, whose practice focuses primarily on capital markets transactions. While there will be some larger deals, “most will be in the $700 million to $2 billion range,” he said.

With assistance from Yelena Dunaevsky

To contact the reporter on this story: Michael Greene in Washington at mGreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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