Markets

Demand for Emerging Growth Issuers Fuels IPO Run

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Initial public offerings are on track to have their best year in a decade as investors display an appetite for riskier bets in emerging growth companies (EGCs). Issuers raised $30.7 billion in 131 IPOs through Aug. 9 this year, according to research firm Dealogic. Over the same period in 2012, only 97 issuers had completed IPOs, although they had raised $32.2 billion in capital. Some of the dollar volume discrepancy could hinge on the market participation of EGCs, which have completed 82% of the IPOs this year and have raised about half of the total proceeds, according to Dealogic.

Markets

Emerging Growth Companies Lead IPO Market

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Most of the JOBS Act provisions intended to facilitate capital formation are still in limbo nearly a year after the law passed and despite congressional pressure on the Securities and Exchange Commission to stop dragging its feet. But small issuers have aggressively taken advantage of the benefits available under the new Emerging Growth Company (EGC) category, a central piece of the law intended to grease the capital-formation skids for firms contemplating initial public offerings. Seventy-two EGCs raised $11.2 billion in IPOs in 2012, according to capital markets researcher Dealogic. That represented a substantial chunk of the IPO market last year: All told, issuers raised a total of $43 billion in 128 IPOs, according to Renaissance Capital Partners, a Greenwich, Conn.-based global IPO research and analysis firm. In early December, Ernst & Young reported that EGCs had filed 74% of new IPO registrations since the JOBS Act became law in April.

Deals
PBYI

Puma Bio Follows Reverse Merger with Public Offering

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Puma Biotechnology (PBYI) followed up its 2011 reverse merger with a $138 million underwritten public offering this October. The DPO (delayed public offering) made for a pointed contrast with companies who go public through the reverse merger route and then find themselves starved for capital and visibility. The offering was upsized from an original target of $120 million. While it is relatively easy to register shares with regulators and attempt to sell the registered shares to the public, an underwritten public offering is much more likely to ensure a significant influx of capital, establish lasting ties with investment banks, generate research coverage and establish a presence among investors. Puma reversed merged with Form 10 shell Innovative Acquisitions Corp.

Markets

BDC Offers Capital to Issuers, Opportunity to Investors

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In an era when smaller companies find it harder than ever to reach the IPO stage, Keating Capital's (KIPO) development company (BDC) provides funds for companies on the way to going public while giving an investors a chance to buy into companies while they are still private. At the same time, Keating Investments negotiates for "structural protection" that allows the fund to soften the blow when an issuer's IPO is not as robust as planned. The fund allows retail investors an opportunity to purchase hot pre-IPO companies, but not when they are so hot as to burn investors. Keating Capital founder Tim Keating told Growth Capital Investor that the venture capital industry harbors unrealistic views of the prospects of many companies it sponsors. "In Silicon Valley, there is a silent conspiracy of optimism with respect to revenue and earnings projections," Keating said.