New York, New York, April 2, 2012 - Venture-backed initial public offering (IPO) activity marked its strongest opening quarter, by number of issues and dollars raised, since the first quarter of 2007. Bolstered by increased stability in the broader U.S. stock market indices, 19 venture-backed companies went public in the United States during the first quarter of 2012, raising $1.5 billion, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). By dollars, the quarter registered a 10 percent increase compared to the first quarter of 2011, when 14 venture backed companies raised $1.4 billion. For the first quarter of 2012, 86 venture-backed M&A deals were reported, 24 of which had an aggregate deal value of $2.7 billion.
Mark Heesen, president of the NVCA said.
"As we close the first quarter of 2012, venture-backed companies are extremely well positioned to consider an initial public offering on a U.S. exchange. The recently passed JOBS Act will grant emerging growth companies temporary but significant regulatory relief during the IPO process, allowing them to focus on accessing capital to grow their businesses. We have two vibrant exchanges that are eager for venture-backed company listings and we have a strong list of companies in registration poised to enter, what appears for the time being, to be a relatively stable market. This environment can only help the M&A market as well, as companies now have two viable exit paths from which to choose."
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Venture-Backed Liquidity Events by Year/Quarter, 2006-2012 |
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*Only accounts for deals with disclosed values |
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| **Includes all companies with at least one U.S. VC investor that trade on U.S. exchanges, regardless of domicile. |
IPO Activity Overview
There were 19 venture-backed IPOs valued at $1.5 billion in the first quarter of 2012, which represented a 10 percent increase in dollar value and a 36 percent increase in volume compared to the first quarter of 2011. Eleven of the 19 IPOs of the quarter were IT-related IPOs representing 58 percent of the total issues for in the quarter.
By location, 18 of the quarter's 19 IPOs were by U.S.-based companies with six coming from the state of California. Guanghzhou, China-based online retailer, Vipshop Holdings (VIPS), was the lone initial public offering from a non-U.S. company. The company raised $71.5 million on the New York Stock Exchange in March.
In the largest IPO of the quarter, ExactTarget (ET), an interactive marketing company based in Indianapolis, raised $161.5 million and began trading on the New York Stock Exchange on March 22nd.
| Venture-Backed IPO Industry Breakdown |
| Source: Thomson Reuters & National Venture Capital Association | |||
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*Includes all companies with at least one U.S. VC investor that trade on U.S. exchanges, regardless of domicile |
For the first quarter of 2012, 10 companies listed on the NASDAQ stock exchange and nine companies listed on the New York Stock Exchange.
Seventeen of the 19 companies brought to market this quarter are currently trading above their offering price. There are 50 venture-backed companies currently filed for an initial public offering with the SEC.
Mergers and Acquisitions Overview
As of March 30th, 86 venture-backed M&A deals were reported for the first quarter of 2012, 24 of which had an aggregate deal value of $2.7 billion. The average disclosed deal value was $113.8 million, down 5 percent from the first quarter of 2012.
The information technology sector led the venture-backed M&A landscape with 68 of the 83 deals of the quarter and had a disclosed total dollar value of $1.9 billion. This was an increase of 37 percent from the first quarter of 2011. Within this sector, Computer Software and Services and Internet Specific deals accounted for the bulk of the targets with 28 and 23 transactions, respectively, across these sector subsets.
Venture-Backed IPO Industry Breakdown
The two largest venture-backed M&A deals of the first quarter were in the Life Sciences sectors as Celgene Corp acquired Avila Therapeutics, a Waltham, Massachusetts-based developer of small molecule therapeutics, for $350 million and Covidien PLC acquired Sunnyvale, California-based BARRX Medical for $325 million.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 54 percent of the total disclosed transactions during first quarter of 2012, up from 42 percent in the third quarter. Venture-backed M&A deals returning less than the amount invested accounted for 21 percent of the quarterly total.
Analysis of Transaction Values versus Amount Invested
** Disclosed deals that do not have a disclosed total investment amount are not included
COMMENTARY: There's no doubt that VC-backed IPO's had a spectacular Q1 2012, but my greatest fear is that many of those IPO's were for internet startups with relatively unproven business models, and many of those VC-backed startups were not profitable. For many VC's getting to the IPO alter is not fast enough. Several VC's and management team executives, like those that backed or worked at Groupon, cashed out prior to the IPO date, which makes you wonder about their reasons. The price-earings multiples for many VC-backed startups that had IPOs are astronomical, including those for LinkedIn, Groupon and Yelp. I am particularly worried about social networks or sites that depend almost entirely on the ad-supported revenue model, which I believe is highly flawed and is basically a zero-sum gain, with ad revenues peaking as growth in users declines and markets reach maximum penetration.
Courtesy of an article dated April 2, 2012 appearing in Reuters
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