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Venture Capital-Backed IPO Activity Shows Promise to Reach New Post-Crisis Peak - September 2014

by Anthony Leung

  • 18 Sep 2014
  • PE
  • VC

Since 2011, there has been an increase in the number of venture capital-backed portfolio companies that have successfully launched an initial public offering (IPO) or secondary offering. As of 15 September 2014, the global count this year so far has amounted to 153, up from 122 in the whole of 2011. According to data from Preqin’s Venture Deals Analyst, only 2007 recorded a higher number (157) of IPOs, which is to be expected given the difficult economic conditions that ensued. With several portfolio companies having filed for an IPO recently, such as Cyber-Ark Software and Tokai Pharmaceuticals, and with over three months to go until the end of the year, it would not be unreasonable to foresee 2014 overtaking the total seen in the boom year of 2007.

As the chart above shows, it is clear that 2012 was particularly strong; a year when shares in technology firms such as Facebook and Yelp became available for the public to acquire. Although the aggregate value in 2013 ($16.4bn) was significantly lower than that of 2012 ($26.2bn), this was largely due to Facebook’s extraordinarily large $16bn IPO in 2012. In 2013, the aggregate value was still markedly higher than 2011 ($13.5bn). At the time of writing, the aggregate IPO value in 2014 stands at $15.6bn, and with time remaining before the end of the year, the total value is likely to witness further increases and may well surpass the total seen in 2013.

In terms of North America-based venture capital-backed IPO activity, 2013 saw the first decline in total IPO values since the recent financial crisis, falling from $22.7bn in 2012 to $12.9bn. This development has continued into 2014, with the aggregate value falling to $5.7bn. Prior to this, North America had exhibited a remarkable increase in both the IPO count and aggregate offering values, stretching from 2008 (six offerings valued at $0.5bn) to 2012 (66 offerings at $22.7bn), although this was again largely affected by Facebook’s IPO. On the other hand, China, which had been exhibiting declines in public exits for venture capitalists between 2010 and 2013, has experienced resurgence in 2014, with 40 public exits valued at an aggregate $5.5bn compared to 32 such exits valued at a total of $1.9bn in 2013. This has been aided by offerings such as JD.com raising $1.85bn in May 2014.

In terms of industries, healthcare has consistently been a sector that has seen a large amount of IPO activity, and 2014 is no exception. With a record 77 completions, and rising, healthcare accounts for 50% of all venture capital-backed IPO activity. Software and internet continue to have a strong presence, making up 11% and 8% respectively of the number of IPOs this year. Despite this statistic, the aggregate IPO value between industries has shown less disparity. Significant public offerings by portfolio companies, such as Just-Eat and King.com, have helped the internet industry to record a total value of $4.2bn for venture capital-backed IPOs in the internet industry in 2014, compared to healthcare’s $5.3bn.

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