The U.S. initial public offering market was one casualty of market uncertainty in the third quarter, as new issue activity dropped sharply, but the deal pipeline remains active.

According to PwC US, after a strong first half of 2011, IPO proceeds dropped from US$12.3 billion in the second quarter to US$3.1 billion in the third quarter. IPO activity was also down compared with the same quarter a year ago, when there were 34 IPOs raising US$4.8 billion. The firm says that the decline is “primarily attributable to high levels of market volatility and continued global macroeconomic challenges”.

PwC says that activity dropped significantly in August in the wake of increased volatility in the markets. “When market volatility spiked in the second week of August, 10 expected pricings were postponed and since then, there has been a slowdown in the number of scheduled offerings,” it says, noting that August and September combined saw only five companies come to market.

There were also six companies that withdrew IPOs during the third quarter after filing to go public earlier in 2011, it notes.

“While pricings are being challenged by short term market events, we are seeing that companies are still looking to an IPO as a long-term viable option for accessing the capital markets. Interim volatility has not displaced the robust number of companies that have entered the registration pipeline during the third quarter, which bodes well for the overall outlook of the US IPO market,” said Henri Leveque, leader of PwC’s US capital markets and accounting advisory practice.

According to PwC, 74 new companies entered the IPO registration process during the third quarter, which was a slight increase compared to the same period in 2010 when 67 companies initiated the registration process, and only down slightly from the 77 companies that filed registration statements in the second quarter.

“The robust pipeline provides a positive outlook for IPOs to continue, however, potential issuers are clearly considering the market conditions in evaluating the timing of their offering as evidenced by the increased postponements,” he added.

Technology companies dominated new entrants to the IPO pipeline in the third quarter, with 21 new companies entering the registration process, followed by financial services and industrials with 12 filings each, and 11 filings for energy companies, it reports.

“The consistent filing activity in the third quarter of 2011 provides optimism amidst a lackluster quarter in terms of pricing activity, as the pipeline remains primed for a strong showing in the fourth quarter of 2011 and into early 2012,” said Leveque.

In the year-to-date, IPO value has doubled, reaching US$27.8 billion compared to US$14.2 billion raised during the first three quarters of 2010.

IE