Equity Capital Markets Update

Transcription

1 Q Investment Banking IPO Activity Returns to Normalized Levels in 3Q In This Report Equity Capital Markets Update September surge brings 3Q IPO activity in-line with 3Q-2015 Strong pricing and performance, growing pipeline point to continued momentum Election and interest-rate uncertainty could provide headwinds in 4Q

2 EXECUTIVE SUMMARY IPO Activity Returns to Normalized Levels in 3Q September s 13 IPOs and strong pricing and performance show increased investor appetite for new issuances. But uncertainty about interest rates and U.S. elections could serve as a headwind to IPO activity in the fourth quarter. Equity markets delivered strong, steady performance in the third quarter, with all three major indexes posting their largest quarterly gains of The DJIA (+2.1%) and S&P 500 (+3.3%) were both up for the fourth consecutive quarter. The Nasdaq ended a two-quarter slide, gaining 9.7%. The VIX was at 13.3 as of September 30, down 15% from July 1 and down nearly 30% from January 1. Despite strong market performance and low volatility, investors continued to allocate away from equities. Equity funds once again saw net outflows, reflecting uncertainty about the longevity of the current bull market. Against this backdrop, we examine IPO and follow-on activity and other trends that shaped equity capital markets in the third quarter. third quarter. Thirty-one IPOs totaling $6.1 billion priced during the third quarter. These figures easily topped 2Q-2016 levels and were in-line withthe prior year period. After relatively light activity in July and August, the IPO market surged to life in September with 13 companies making their public debuts. This latesummer uptick reflects increased investor appetite for new issuances. Third-quarter IPO activity was fairly balanced across sectors; although technology and healthcare accounted for more than two-thirds of the quarter s offerings. Messaging app LINE had the quarter s largest IPO, raising $1.3 billion. Cloud-computing company Nutanix raised its filing range and then priced above that upwardly revised range, raising $274 million. Nutanix traded up 131% on the company s first trading day, representing the largest day-one pop for a technology IPO in more than two years. Patheon raised $719 million, making it the largest healthcare IPO in two years. Highlights from other sectors include e.l.f. Beauty, which raised $163 million by filing above its range and then traded up 56% on the first day, and Valvoline, which raised $759 million. Valvoline was one of only four $500 million+ IPOs during the third quarter, and the average size of the quarter s offerings was just $198 million. Pricing and performance of thirdquarter IPOs was strong a direct reflection of the quality of companies September Surge Brings 3Q IPO Activity In-Line With 3Q-2015 After a very slow start to the year, there were several icebreaking IPOs in the second quarter, and this modest uptick in momentum continued in the

3 that came to market and increased investor risk appetite. During the first six months of 2016, only one IPO priced above the range. But during the third quarter, eight of the 31 IPOs priced above the range. Third-quarter IPOs produced an average first-day return of 21% and average aftermarket performance of 40% as of September 30. This impressive performance should motivate other companies on the sidelines to consider pulling the trigger on an IPO. IPO Backlog Continues to Grow In the third quarter, 37 companies were added to the IPO pipeline, with 18 of those filings coming in September. Notable third-quarter filings include Yeti, BlackLine Systems, Ironshore, and Playa Hotels & Resorts. The full-year pipeline now totals 64 companies and $8.8 billion. The shadow backlog contains several high-profile names, headlined by Snap Inc. According to an October 6 article in The Wall Street Journal, the parent company of messaging app Snapchat is preparing for an IPO that could value the company at $25 billion or more. This valuation would make Snap the largest company to go public in the United States since Other companies thought to be preparing to go public include AppDynamics, Blue Apron, and Spotify. Continuing a trend seen throughout 2016, several companies, including Vizio, United Guaranty, and inventiv, abandoned IPOs plans during the third quarter in favor of an acquisition or additional round of private funding. Follow-On Activity Increases During the third quarter, 133 followon offerings priced, raising a total of $34 billion, a 26% year-over-year increase. Continuing trends seen in previous quarters, healthcare and industrials accounted for approximately 75% of the thirdquarter activity, and approximately 80% of the quarter s follow-ons were shelf take-downs. Fourth Quarter IPO Outlook The IPO market is experiencing both tailwinds and headwinds as we head into the fourth quarter. Low volatility, a growing pipeline that includes highprofile names, and the strong performance of recent IPOs suggest a continuation of September s momentum. We expect fourth-quarter IPO activity to be in-line with the third quarter. This would put 2016 on track for about 100 IPOs, which would represent the slowest year since Despite the recent momentum and favorable market conditions, several factors could put a damper on IPO activity in the fourth quarter. The U.S. presidential election in November and the prospect of the Federal Reserve raising interest rates in December are injecting a high degree of uncertainty into financial markets; investors also will be closely monitoring corporate earnings and oil prices. In addition to this uncertainty, the holiday season usually causes a lull in activity in November and December regardless of market conditions.

4 MARKET UPDATE AND ANALYSIS 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.

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6 WILLIAM BLAIR EQUITY CAPITAL MARKETS INVESTMENT BANKING FRANCHISE 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* 122 equity offerings $27.0 billion raised 23% IPO market share 25% of ECM activity is bookrun Bookrun/ Lead-Managed * Equity Capital Markets activity for period January 1, 2015 through September 30, 2016

7 Top Rankings in 2016 Greenwich Associates Survey William Blair s institutional equity research, sales, and trading groups received multiple top rankings in the 2016 Greenwich Associates survey. Small- and midcap portfolio managers ranked William Blair No. 1, No. 2, or No. 3 in 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 Attention to covered companies (makes most calls & visits) Quality of equity analyst service Service intensity First firm relationships No. 2 rankings Knowledge of companies & industries Access to research analysts 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 Most useful conferences/industry seminars No. 3 rankings Tailored research calls and services Equity sales capability 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). *In the past five years as of January 1, 2016

8 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. About William Blair Investment Banking William Blair s investment banking group combines significant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and financing solutions to our global base of corporate clients. We serve both publicly traded and privately held companies, executing mergers and acquisitions, growth financing, financial restructuring, and general advisory projects. This comprehensive suite of services allows us to be a long-term partner to our clients as they grow and evolve. From 2011 to 2015, the investment banking group completed more than 350 merger-andacquisition transactions worth $95 billion in value, involving parties in 26 countries and four continents, was an underwriter on more than 20% of all U.S. initial public offerings, and raised more than $120 billion in public and private financing.