Number of IPOs likely to increase
Activity poised for rebound after poor year
When Schneider National Inc. registered with securities regulators last week for a public stock offering, the Green Bay trucking company likely was on the cusp of a trend.
After a disappointing year for initial public offerings, prospects have improved for more of them in 2017, according to two reports released this month.
“As the IPO pipeline continues to fill, we anticipate that deal activity in 2017 will exceed the level of this year,” said the Ernst & Young Global IPO Trends report for the fourth quarter.
“Our forecast for 2017 is that it should be a significantly better year, both in terms of number of IPOs and proceeds raised,” said Renaissance Capital’s U.S. IPO Market Annual Review.
Despite big stock market gains in 2016, it was the slowest year for IPOs since 2009, both reports said.
Only 120 companies filed for IPOs in 2016, a nearly 50% decrease from 2015, according to Renaissance Capital’s review. With IPO activity at an eight-year low, proceeds were even more dismal, at their lowest since
2003, the review said.
“What happened in 2016 is that the year got off to such a crummy start,” said John F. Collopy, director of research for the Oshkosh brokerage firm Carl M. Hennig Inc. “January and February were just messy; that puts issuers on their heels, they don’t want to do a deal and have it fail.”
Layered on top of that was the market downturn in June after a vote in the United Kingdom to leave the European Union, Collopy said. “It put everyone in a very, very careful mood,” he said.
The improvement in the stock market, particularly since the presidential election, has raised valuations of stocks, making comparisons better for
companies considering IPOs, said Ignatius L. Smetek, president and chief investment officer at Arcataur Capital Management LLC in Milwaukee.
“The whole story since the election is small cap domestic stocks hugely outperforming and interest rates rising,” Smetek said.
Renaissance said its private company watch list contains 277 companies, more than 50 of which have selected banks or filed confidentially. The most highly anticipated name on its list is Snap, the parent of Snapchat, which is expected to file for an IPO that could raise as much as $4 billion in the first half of the year. Another anticipated mega IPO candidate is Spotify, which raised $1 billion in convertible debt financing in March, Renaissance said.
Schneider sketched out a dual-class stock plan that will give shares held by family members 10 times the voting power of the shares that trade publicly in the prospectus it filed with federal securities regulators. The Green Bay company said it would raise up to $100 million in the IPO, but noted that the figure was an estimate provided to compute the amount of the registration fee.
Along with Schneider, candidates in Renaissance’s pipeline include Blue Apron, which delivers packaged ingredients and recipes for home meal prep; women’s clothing retailer J. Jill; Invitation Homes, a Blackstone-backed REIT focused on single-family homes; AppNexus, an automated adbidding platform; and AppDynamics, a performance management software provider. Kathleen Gallagher can be reached at kathleen. gallagher@jrn.com.