Venture-Backed IPOs Fly Past Year Ago

Interest rate worries and the accompanying volatility in the public equity markets have created reams of speculation on when the initial public offering market will slow down. However, the filings just keep on coming and venture-backed companies are leading the charge with bigger offerings and higher post-offer valuations.

During the first half of 1999, 96 venture-backed IPOs were priced, surpassing the total for all of 1998 when 78 companies came to market, according to Venture Economics Information Services, a division of Thomson Financial and a sister company of Private Equity Week. Additionally, the pipeline remains chock full, as venture firms had 93 companies in registration as of June 30 versus just 37 companies that had filed at this same time last year.

To the surprise of nobody, technology companies that enable or provide access to the Internet led the fray. The computer software sector blew the lid off, bringing 52 companies to market. Communications companies came in a distant second with 16 offerings and the consumer-related segment brought 14 companies. No other segment produced more than five offerings.

Underwriting remained competitive in the first half of the year, as BancBoston Robertson Stephens and Credit Suisse First Boston were tied atop the table, with each firm having led 13 venture-backed offerings. Morgan Stanley Dean Witter logged 11 lead assignment to stand alone in third place, followed by Donaldson, Lufkin & Jenrette with 10 offerings and Goldman, Sachs & Co. rounding out the top five with nine mandates.

Assuming at least half of the 93 companies currently in registration price by year end, the number of offerings for 1999 will surpass the past two years handily. Having already blown past 1998’s number, 43 more offerings will surpass the 138 that priced in 1997. In fact, a healthy third quarter could put that challenge to rest. However, the 1996 high water mark of 280 appears safe, for the time being.

The average offering size this year has jumped also, as the average company raised $74 million in its IPO. By comparison, last year the average company raised $49.2 million, in 1997 $35.9 million and in 1996 $43.6 million. That fact seems to be a response to the shuddering of the IPO window last fall when investors wanted no part of small offerings.