The resurgence in the U.S. initial public offering (IPO) market so far this year is due to positive returns, which are bolstering investor demand, says Fitch Ratings in a new report.
Fitch reports that a total of 210 IPOs have been priced in 2013, “making it one of the busiest years post-crisis based on the number of filings”; citing data from Renaissance Capital.
“The surge in IPO volume in 2013 can be attributed to a significant increase in investor demand based on the performance of recently completed IPOs,” the rating agency says, adding that higher valuations have also helped boost the number of IPO transactions this year.
Fitch says that the average IPO has returned nearly 34% from its IPO price, according to Renaissance Capital. And, it reports that the median aggregate market valuation multiple for speculative-grade companies has increased so far this year. “If this level holds through 2013, it would be the highest median multiple in the last 10 years,” it says.
The result is that private equity firms that had companies they were unable to sell due to the financial crisis have been able to exit those investments and return value to their investors, it notes.
Fitch also says that, while the number of IPO filings is nowhere near its levels before the bursting of the dotcom bubble, “if favourable capital market conditions persist, we would expect IPO volume to continue to trend higher.”