Markets

Growth Equity Market in Transition as Autumn Deal Season Begins

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The emerging growth capital market rounds the corner into the fall deal season with overall robust deal flow masking major shifts in how and to whom capital is allocated. Increasing reliance on registered offerings of common stock priced at market is remaking the old PIPE market of “desperation financing” into a deep and efficient marketplace for issuers seeking strategic capital to fuel targeted corporate development programs.

At the close of August, the equity private placement (EPP) market had raised $29.15 billion in capital in registered and unregistered equity and equity-linked offerings in 2013. That’s a 5% increase over the same period in 2012. That respectable aggregate market growth overlays significant shifts in capital allocation by growth capital investors away from unregistered to registered offerings, led by the growth of at-the-market (ATM) and, surprisingly, old-fashioned rights offerings. Were it not for a 300% increase in ATM dollars raised, and 400% increase in rights offerings in the first eight months of the year compared to a year ago, the 2013 EPP market would be trailing 2012 activity by almost $10 billion.  ATM offerings increased from 80 programs raising $765.8 million a year ago to 108 programs that have raised $2.38 million so far this year, accounting for 8% of all capital raised in the EPP and PIPE markets this year.

Markets

Growth Equity Offerings Increase in Q1

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Growth companies raising capital in equity private placements during the first quarter continued to benefit from an investment trend that is focused on fundamentals, one that is supplanting a market once dominated by funds bent on arbitrage and structured investments. While first quarter capital-raising activity usually slows in relation to traditionally busy fourth quarters, the confluence of Hurricane Sandy, the presidential election and fiscal cliff uncertainties late last year managed to upend the norm. Issuances of 102 growth equity private placements (EPPs) in the first three months of 2013 exceeded 2012’s fourth period total by 11 deals, according to PlacementTracker, Sagient Research’s research tool that tracks equity private placements of more than $1 million. Deal activity in the first quarter this year was on par with the period a year earlier, when companies completed 105 growth EPP transactions. (Growth EPPs are defined here as private placements of a least $1 million of stock or equity-linked debt that feature fixed purchase, conversion and warrant exercise price terms, issued by public emerging growth companies with market capitalizations of between $10 million and $1 billion and a common share price of $1 or more at the time of the deal’s close.

Markets

Growth Equity Investors Dominate 2012 EPP Market

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Fundamental investment-oriented growth equity investors increasingly replaced trading-oriented funds as leaders in the equity private placement (EPP) market in 2012, marking a changing of the guard in an area of the capital markets critical to the development of emerging growth companies. For the first time since the dawn of the PIPE (private investment in public equity) market in the mid-1990s, a long-only mutual fund manager led the market in total deals and total investment among active investors, usurping the fast-money hedge funds that had long dominated the market. Fidelity Management & Research invested $190.7 million in 45 equity private placements in 2012, making the mutual fund behemoth the leading active investor in the market in both number of deals and total investment, according to market monitor PlacementTracker. But Fidelity was not alone among fundamental-oriented investors making their way up the PIPE ranking lists last year. Of the top 25 investors in the market, at least 10 are generally regarded as long-only, fundamental-focused mutual and venture capital fund managers, including insurance and annuity giant TIAA, Wellington Management, Columbia Management, T. Rowe Price, and Orbimed Advisors.

Markets
PIPE Deals Jan 2013

Growth Equity Investors Dominate 2012 PIPE Market League Tables

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Fundamental investment-oriented growth equity investors increasingly replaced trading-oriented funds as leaders in the PIPE market in 2012, according to data released by market monitor PlacementTracker. For the first time since the data service began tracking investment in PIPEs in 1995, a long-only mutual fund manager led the annual PIPE investor league tables in total deals and total investment among active funds, usurping the fast-money hedge funds that had dominated not only the top spot but the entire top 25 rankings in many years. Fidelity Management & Research invested $190.7 million in 45 growth equity private placements in 2012, making the mutual fund behemoth the leading active investor in the market in both number of deals and total investment. But Fidelity was not alone among fundamental-oriented investors making their way up the PIPE ranking list last year. Of the top 25 investors in the market, at least 10 are generally regarded as long-only, fundamental-focused mutual and venture capital fund managers, including insurance and annuity giant TIAA, Wellington Management, Columbia Management, T. Rowe Price, and Orbimed Advisors.