2014 IPO Momentum on Track to Surpass 2013, Producing an Estimated 250,000 U.S. Jobs; Smaller IPOs Are Surging
from CohnReznick LLP
The United States is heading for its highest Initial Public Offering (IPO) activity since 2000, according to new research released today by CohnReznick LLP, a top ten accounting, tax, and advisory firm with a practice dedicated to helping middle-market companies with liquidity events and capital formation.
The report indicates that 2014 IPO activity is on track to surpass 2013 figures, with 230 IPOs taking place during the first three quarters of the year, compared with 180 for the same time period in 2013. CohnReznick anticipates IPO activity for the year will exceed 315 deals, marking the highest level since 2000. If the strong market activity keeps pace through the end of the year, new IPOs can be credited with injecting an estimated 250,000 new jobs into the U.S. economy.
The CohnReznick Middle Market Equity Capital Report is the third in a series of quarterly reports from CohnReznick examining the state of the IPO market and its impact on middle-market businesses. In the United States, middle market businesses, those with market caps of $100M to $1B, are a major driver of economic activity and job growth. These companies generally go to market with smaller IPOs of $85M or less.
According to Dom Esposito, partner and leader of CohnReznick's National Liquidity and Capital Formation Advisory Group:
"Right now, we are experiencing a robust IPO market including smaller IPOs, the likes of which we have not seen since the 1990s. As the fourth quarter is typically the most active quarter for IPO activity, we anticipate a strong outlook for the remainder of the year. Activity of this scale is in large part a reflection of the confidence investors have in the equity markets and a strong indicator that the JOBS Act is working."
According to the report, the 2014 IPO market is still well ahead of 2013's pace. The first nine months of 2014 saw a total of 136 middle market IPOs, compared to 80 middle market IPOs for the same period last year.
Additional top findings from the CohnReznick Middle Market Equity Capital Report include:
- IPOs have been found to each create an average of 822 jobs according to research by the Kauffman Foundation. With a forecasted total of 315 IPOs in 2014, that equates to over 255,000 new jobs resulting from IPO activity.
- The surge in 2014 IPO activity and the increase in smaller IPOs are more than likely attributable to companies taking advantage of the "testing the waters" and "confidential filing" provisions of the JOBS Act. Smaller IPOs are at their highest level since 1999 adjusted for inflation.
- The report points to continued investor interest in technology and healthcare companies, which represented 60% of all corporate IPOs during Q3 2014. These sectors are typically venture capital backed, and we are encouraged to see that IPO exits continue to be viable. Successful IPO exits translate into vibrancy throughout the venture capital food chain, catalyzing innovation, job growth, and new funding for VCs.
The full study and research will be released later this month and available at www.cohnreznick.com/capitalformation.