Equity Capital Markets Update

Transcription

1 Q ECM Quarterly Favorable Market Conditions Drive Uptick in 2Q IPO Activity In This Report Equity Capital Markets Update IPO activity jumps to highest level in two years IPO filings increase Follow-on activity maintains robust pace Favorable market conditions point to continued IPO activity in 3Q

2 EXECUTIVE SUMMARY Favorable Market Conditions Drive Uptick in 2Q IPO Activity Rising stock prices and falling volatility create a favorable environment for companies looking to raise public equity capital During the first six months of 2017, stock markets delivered their strongest first-half performance in years. The Dow Jones Industrial Average and the S&P 500 each gained about 8%, their best starts to a year since Meanwhile, the Nasdaq surged 14%, marking the index s largest first-half gains since Volatility continued to fall, as the CBOE Volatility Index (VIX) closed the second quarter at the lowest level in more than two decades. The first-half stock market rally was triggered by expectations that the Trump administration and a Republican-controlled Congress would lower tax rates and implement other reforms that would spur economic growth. But even as questions arose about Republicans ability to enact such reforms, stock markets continued to rally based on strong corporate earnings, rising U.S. consumer confidence, and a stabilizing global economy. Equity investors also digested news from the U.S. Federal Reserve s June policy meeting, during which Fed officials raised the benchmark rate a quarter point despite soft inflation numbers and outlined a plan for reducing the Fed s balance sheet. During the second quarter, net outflows from equity funds were $19.7 billion, compared with outflows of $21.5 billion in the first quarter, according to IRI. As a whole, market conditions in the second quarter created a receptive environment for companies looking to raise public equity. IPO and follow-on markets both saw increased activity in the second quarter, and the strong performance of second-quarter IPOs, a robust pipeline, and stable market conditions point to continued activity in the third quarter. IPO Activity Jumps to Highest Level in Two Years The second quarter saw 43 IPOs, the most since the second quarter of 2015, raise a total of $9.6 billion. While the number of IPOs more than doubled from the first quarter, the proceeds represented an increase of only 5.5%, as Snap s $3.9 billion March IPO bolstered first-quarter levels. Companies have already raised nearly as much through IPOs in the first half of 2017 ($18.7 billion) as they did in all of 2016 ($18.8 billion). Continuing a trend seen over the past several years, smaller deals dominated IPO activity in the second quarter. There were only four $500 millionplus IPOs during the quarter, and the median deal size was just north of $100 million. The second quarter s two largest IPOs were by private-equity-backed companies, cable provider Altice USA and industrial parts manufacturer Gardner Denver. Altice USA raised Volatility and IPO Volume The 43 IPOs in the second quarter were the most in two years, as strong equity returns and historically low volatility created a favorable backdrop for companies looking to access public markets. The VIX ended the quarter at its lowest level in two decades /16 7/16 8/16 9/16 10/16 11/16 12/16 1/17 2/17 3/17 4/17 5/17 6/17 Source: Dealogic and FactSet 30D Rolling IPO Filings CBOE Volatility Index (VIX)

3 $2.2 billion through its mid-june IPO, the largest telecom IPO since The second-quarter s biggest first-day pop was achieved by flooring retailer Floor & Décor, which gained 53% on the first day of trading and closed the quarter up 87%. Online used car retailer Carvana s stock fell 26% on the first day of trading but rebounded to finish the quarter 37% above its offering price, making it one of the second-quarter s best-performing IPOs. Blue Apron s highly anticipated IPO struggled, as the meal-kit delivery company priced its shares at the bottom of its lowered range and raised $300 million, onethird less than planned. Investor demand for Blue Apron s June 28 IPO was hurt by Amazon s announcement, less than two weeks earlier, that it was acquiring Whole Foods Market. Seventy percent of second-quarter IPOs priced in or above the range, and the quarter s IPOs traded up an average of 8.5% on the first day, slightly below the long-term average of 10% gains on first-day trading. Second-quarter IPOs delivered strong aftermarket performance, finishing up an average of 13.8% on June 30, significantly outpacing major indexes. IPO Filings Increase In the second quarter, 47 companies filed for an IPO, the highest quarterly total in two years and well above 2016 s average of 27 per quarter. The current backlog comprises 37 Second Quarter 2017 IPOs by Sector Healthcare and technology accounted for more than half of all U.S.-listed IPOs in the second quarter of Source: Dealogic 13 companies looking to raise $4.0 billion. The shadow backlog remains robust and includes high-profile names, such as Ancestory.com, restaurant chain Pret A Manger, and technology companies WeWork, Lyft, Houzz, Dropbox, and Pinterest. Follow-on Activity Continues at Robust Pace In the second quarter, 153 follow-on offerings priced, a 19% increase on a year-over-year basis, raising $31 billion. In the first six months of the year, 329 follow-ons priced, putting 2017 on pace to be the most active year in more than two decades. Driven largely by activity in life sciences and biopharma, healthcare was the most active industry, with 64 follow-ons, a 49% increase on a year-over-year basis. So far in 2017, confidentially marketed/overnight deals and bought deals have accounted for 85% of all follow-ons Consumer Financial Healthcare Services Industrial Technology Favorable Market Conditions Point to Continued IPO Activity in the Third Quarter Given extremely low volatility, the strong aftermarket performance of recent IPOs, and a growing pipeline across a diverse cross-section of industries, IPO activity should continue at healthy levels in the third quarter. The stock market rally, however, could be tested over the next several weeks as companies report their second-quarter earnings. Investors will be looking for earnings growth to justify valuations that have surged over the past several years. Also, activity may taper off as we enter the typical summer slowdown in August and early September. William Blair 2

4 MARKET UPDATE AND ANALYSIS Index, Sector, and Asset Class Performance Year-to-Date 2017 Major stock indexes delivered their best first-half returns in years. While hopes for tax reform may have dimmed, investor sentiment was buoyed by increasing consumer confidence and a stabilizing global economic environment. Against the backdrop of a broad-based rally, 2017 s IPOs have significantly outperformed the S&P and Dow Jones Industrial Average. ECM Quarterly Market Analysis Each quarter we look behind the numbers to examine the trends and dynamics that are driving activity in equity capital markets. Nasdaq S&P 500 DJIA Russell 2000 VIX (20.4%) Healthcare Services Consumer Industrial Financial Technology Energy (3.5%) U.S. 10YR T-Note (6.0%) Euro per Dollar (7.5%) Crude Oil (14.3%) IPOs Follow-Ons Sources: Dealogic and FactSet; data through 6/30/ % 8.2% 8.0% 4.3% 15.1% 12.2% 8.4% 8.2% 6.0% 1.8% 14.4% 4.4% IPO Volume by Year and Quarter Companies have already raised nearly as much through IPOs in the first half of 2017 as they did in all of ($ in billions) $ $18.8 $ # IPOs >$1.0Bn Deal Value: 2015: : YTD: $4.8 $6.1 $7.3 $9.1 $ Q2016 3Q2016 4Q2016 1Q2017 2Q2017 # of IPOs Gross Proceeds ($Bn) Note: All IPO and follow-on data excludes offerings for yield products (BDCs, CLEFs, MLPs, SPACs and REITs) Sources: Dealogic and FactSet 3

5 IPO Overview Second Quarter 2017 The trend of smaller offerings has continued in In the second quarter, there were only four $500 million-plus offerings, and the median deal size slightly exceeded $100 million. Seventy percent of the quarter s IPOs priced in or above the range, and the average aftermarket performance of the 43 IPOs was 13.8% as of June 30. Largest IPOs 2017 ($ in millions) Pricing Date Issuer Deal Value Market Value Sector 6/21/17 Altice USA Inc $2,151.7 $22,112.1 Technology 5/11/17 Gardner Denver Holdings Inc $949.9 $3,918.5 Industrial 4/10/17 Azul SA $643.2 $2,206.3 Services 4/5/17 Schneider National Inc $612.8 $3,360.0 Services 5/24/17 WideOpenWest Inc $356.5 $1,487.0 Technology 5/9/17 Five Point Holdings LLC $338.1 $2,012.1 Services 4/12/17 Warrior Met Coal LLC $316.7 $1,015.4 Industrial 4/27/17 Emerald Expositions Events Inc $303.0 $1,227.4 Services 6/28/17 Blue Apron Holdings Inc $300.0 $1,895.8 Technology 4/27/17 Cloudera Inc $258.8 $1,954.7 Technology Aftermarket Performance 70.3% 27.7% 28.6% 22.9% 32.1% 8.7% 30.1% 16.4% 14.9% 8.7% (13.2%) (8.6%) 7/1/16 8/1/16 9/1/16 10/1/16 11/1/16 12/1/16 1/1/17 2/1/17 3/1/17 4/1/17 5/1/17 6/1/17 Pricing vs. Filing Range IPO Priced % 71% 36% 29% 85% 15% 68% 32% 100% 33% 67% 75% 67% 25% 33% 78% 76% 22% 24% 57% 43% 75% 25% 7/1/16 8/1/16 9/1/16 10/1/16 11/1/16 12/1/16 1/1/17 2/1/17 3/1/17 4/1/17 5/1/17 6/1/17 Below Filing Range In or Above Filing Range Source: Dealogic William Blair 4

6 MARKET UPDATE AND ANALYSIS Follow-On Offering Overview Year-to-Date 2017 In the second quarter, 153 follow-on offerings priced, a 19% increase on a year-over-year basis, raising $31 billion. In the first six months of the year, 329 follow-ons priced, putting 2017 on pace to be the most active year in more than two decades. Annual Follow-On Activity ($ in billions) $250 $200 $ $100 $ $0 Follow-Ons Priced by Marketing Type 18% 16% 13% 15% 14% 18% 18% 21% 23% 7% 13% 22% 10% 29% 34% 36% 25% 23% 35% 37% 22% 17% 24% 21% 65% 19% 36% 28% 34% 35% 27% 33% 34% 26% 34% 25% 36% 36% 35% 23% 17% 17% 13% 15% Source: Dealogic FMFO (>3Days) ABB(<3Days) CMFO(Overnight) BD 5

7 Drawing on our deep sector expertise and the strength of our relationships, William Blair has built a leading equity capital markets franchise. Business owners and financial sponsors turn to us for outstanding execution for their capital raising objectives. Recent transactions include: William Blair By the Numbers* 158 equity offerings $36.9 billion raised 22% IPO market share 27% of ECM activity is bookrun Bookrun/ Lead-Managed * Equity Capital Markets activity for period January 1, 2015 through June 30, 2017 William Blair 6

8 WILLIAM BLAIR EQUITY CAPITAL MARKETS INVESTMENT BANKING FRANCHISE Top Rankings in 2017 Greenwich Associates Survey William Blair s institutional equity research, sales, and trading groups received multiple top rankings in the 2017 Greenwich Associates survey. Small- and midcap portfolio managers ranked William Blair No. 1, No. 2, or No. 3 in over ten categories in the Greenwich survey, which is the preeminent survey in the institutional investor community. No. 1 rankings Provider of ideas that generate Alpha Service intensity Coverage intensity First firm relationships Access to research analysts Knowledge of companies & industries Tailored research calls and services No. 2 rankings With more than 150 senior bankers around the world, William Blair has completed more than 2,000 advisory and financing transactions totaling more than $200 billion in value for our clients* Equity Capital Markets Brett Paschke Head of Equity Capital Markets bpaschke@williamblair.com Steve Maletzky smaletzky@williamblair.com Todd Speece tspeece@williamblair.com Top 10 Relationships No. 3 rankings Equity sales capability Quality of equity analyst service Access to Industry Leaders William Blair is committed to providing the equity capital markets community access to leading industry investors and companies around the globe. To learn more about attending our upcoming conferences, please contact Gary Morabito (gmorabito@williamblair.com). * As of December 31,

9 Disclosure William Blair is a trade name for William Blair & Company, L.L.C., William Blair Investment Management, LLC and William Blair International, Ltd. William Blair & Company, L.L.C. and William Blair Investment Management, LLC are each a Delaware company and regulated by the Securities and Exchange Commission. William Blair & Company, L.L.C. is also regulated by The Financial Industry Regulatory Authority and other principal exchanges. William Blair International, Ltd is authorized and regulated by the Financial Conduct Authority ( FCA ) in the United Kingdom. William Blair only offers products and services where it is permitted to do so. Some of these products and services are only offered to persons or institutions situated in the United States and are not offered to persons or institutions outside the United States. This material has been approved for distribution in the United Kingdom by William Blair International, Ltd. Regulated by the Financial Conduct Authority (FCA), and is directed only at, and is only made available to, persons falling within COB 3.5 and 3.6 of the FCA Handbook (being Eligible Counterparties and Professional Clients). This Document is not to be distributed or passed on at any Retail Clients. No persons other than persons to whom this document is directed should rely on it or its contents or use it as the basis to make an investment decision. William Blair s investment banking group enables corporations, financial sponsors, owner/entrepreneurs, and governments around the world to achieve their growth, liquidity, and financing objectives. About William Blair Investment Banking Drawing on the collective intellectual capital and deep sector expertise of a global team that reaches across more than 20 cities on five continents, the investment banking group brings a rigorous and innovative approach to corporate board advisory projects, mergers and acquisitions, and equity and debt financing. From 2012 to 2016, the team advised on more than $230 billion in completed transaction volume.