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US venture-backed IPOs record strongest month since 200422/08/2007. Source: NVCA, Thomson Financial.
 Eleven venture-backed companies raised $1.6bn through initial public offerings on US exchanges in May 2007, according to data from the National Venture Capital Association and Thomson Financial. This activity represents the first time monthly offerings from venture-backed companies have reached the double digits since October 2004. May 2007 was also the highest month for dollars raised since August 2004 when the IPO offer amount, bolstered by the debut of Google, reached nearly $1.9bn.
Mark Heesen, president of the NVCA was cautiously optimistic about the recent activity.
"The venture-backed IPO volume in May and the market performance of those companies that went public thus far this year is very favorable compared to the last several years. These companies have successfully run the gauntlet, having weathered the technology bubble burst and Sarbanes Oxley compliance costs. They are likely the strongest batch of newly public companies in some time. However, we will need to see consecutive double digit monthly IPO volume for the rest of 2007 to declare any sort of recovery. Meaningful Sarbanes Oxley reform will go a long way towards helping other promising venture-backed companies reach their IPO goals."
*Includes all companies with at least one U.S. VC investor that trade on U.S. exchanges, regardless of domicile.
May's strong performance, coupled with a stable first quarter, boosted the number of venture-backed IPOs for the first five months of 2007 to 33, the highest level since 2000. Furthermore, the average offer amount from January through May broke all-time records to reach $156.7 million per issue. Adding to this trend, the three month period from March-May 2007 marked the first consecutive stretch for $1 billion plus monthly volume - the first time this has occurred since 2000's nine month stretch.
The industry composition for the first five months of 2007 shows the majority of offerings occurring in the Medical, Health, and Life Sciences industries followed closely by Information Technology issues. Some notable IPOs included MetroPCS Communication's $1.15 billion issue and AECOM Technology Corporation's $703 million issue, both of which occurred in the second quarter.
Average performance is strongest for offerings in the information technology sector which have realized a 13.9% increase from their offer price to closing price yesterday, which compares favorably to the 8.6% change from offer to close price yesterday for all issues on US exchanges in the same time period. Medical/Health/Life Science and Non-High Technology sectors lag behind the benchmark at 2.2% and 6.6%, respectively.
Presently there are 45 venture-backed companies filed for an initial public offering with the SEC. This compares to 44 companies in registration at the end of the first quarter of 2007, and 36 at the end of 2006.
Alex Tan, Global Private Equity Research Manager for Thomson Financial remarked, "The level of venture capital-backed companies "in registration" represents a backlog that has been building for some time. These companies are still weighing alternatives and could still choose other options besides an IPO. However, the flurry of new issues during the first five months of 2007 and the notable performance of venture-backed IPOs could send the right signals that the market is receptive to these companies and that an IPO path is the right one."
The National Venture Capital Association (NVCA) represents approximately 475 venture capital and private equity firms. NVCA's mission is to foster greater understanding of the importance of venture capital to the U.S. economy, and support entrepreneurial activity and innovation. For more information about the NVCA, visit www.nvca.org
Thomson Venture Economics, a Thomson Financial company, is the foremost information provider for equity professionals worldwide. For more information about Venture Economics, visit www.ventureeconomics.com
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