What a Difference a Year or Two Make in the U.S. IPO Market

Signs Exist For a Good U.S. 2010 IPO Market, Especially for Foreign Companies

January 20, 2010 - What a difference a year or two make.  2008 was a tough year for the U.S. initial public offering (IPO) market, both due to the meltdown in the global equity markets and the global recession.  In 2008 there were only 31 U.S. IPOs, which was the lowest number of IPOs since 1975.  The fourth quarter of 2008 was an even bigger disaster with only one U.S. IPO coming to the market. 

The first quarter of 2009 wasn’t much better. The year started with the worst market for U. S. IPOs in decades.  With the U.S. stock market reaching a multi-year low by March, there were only two IPOs that went public in in the U.S. in the first quarter of the year.  Then the general market recovery started.  

In the second quarter of 2009 there were a total of 10 IPOs, and in the third quarter there were 12.  But the fourth quarter of 2009 was completely different.  The U.S. market for IPOs took off and 30 IPOs came to market.  And, somewhat remarkably, by the end of last year, approximately 75 percent of 2009’s IPOs were trading above their IPO share prices.

Also, worth noting is that about one-quarter of companies that went public in 2009 were foreign companies.  The year’s largest U.S. IPO, which raised slightly over $7 billion, was by Brazil’s Banco Santander. But the real story in 2009 was about Chinese companies.  Of the 14 non-U.S. companies that went public in the U.S., 11 were based in mainland China.  One was from Brazil, one from Singapore and one from Hong Kong. None were from Europe.

Despite today’s market sell-off, which was partially due to tightening credit in China, it is expected that the U.S. market for IPOs for the rest of this year will be about non-US based companies going public, and will be dominated by Chinese companies.