pic-trent.jpgCONTRIBUTED BY
Trent Dykes

Compliments of our colleague Christopher Paci, the Chair of DLA Piper’s US capital markets practice, below is a review of 2012 US equity and debt capital markets activity.

Equity.  US equity and equity-related proceeds totaled $244.5B from 795 deals, a 32.7% increase compared to 2011. IPOs accounted for $40.9B, or 16% of the total, in 2012, up 18% from 2011 (excluding Facebook, down 27%). Follow-on equity offerings represented $182B, or 74%, of the total, up 45% from 2011.

IPOs.  Overall, the IPO market was modestly more active in 2012, with 128 deals closed, up 2% from 2011. IPO activity consisted mainly of smaller deals. 2012 got off to a strong start, with a forward calendar that included the most anticipated deal in years (Facebook). However, Facebook’s troubled debut on Nasdaq coupled with the recurring European debt crisis led to the IPO window closing during May and June. IPO activity returned intermittently in the second half of 2012, but uncertainty surrounding the fiscal cliff and the impact of Hurricane Sandy contributed to a disappointing end of the year. Of particular note:

  • Private equity-backed IPO issuance was up 26% by deal count but down by 50% in terms of proceeds, with only one IPO raising over $1B.
  • Excluding Facebook, VC-backed IPO activity was down 16% by deal count and 43% by proceeds.
  • The most active sectors in the IPO market were technology, financial services and energy.
  • The passage of the JOBS Act in April 2012 has reduced visibility into the IPO pipeline. Only 140 new filers filed publicly in 2012, down from 257 in 2011. The shadow pipeline of emerging growth companies (“EGCs”) submitting confidentially under the JOBS Act is estimated at 60-100 issuers.
  • Renaissance Capital’s estimate of the IPO backlog at December 31, 2012 is nearly 180 companies, with strong representation from e-commerce and enterprise software firms.

Despite three years of recovery from the financial crisis, the level of IPO activity still has not returned to the historical norm of 150-200 annual deals.

Follow-on offerings. 2012 saw a significant increase in block trade volume, which doubled to $44.5B from the prior year.

Debt. With interest rates at all-time lows, both the investment grade and high-yield debt capital markets saw phenomenally strong levels of issuance in 2012. US investment grade proceeds were $999.5B, up 31% over 2011. In the high-yield debt market, investors chasing yield drove $326.2B of new issuance, up 45% over 2011.