As a general rule, the IPO market is highly sensitive to market volatility. And, the latest bout of financial turmoil has been brutal.
According to a recent report from PricewaterhouseCoopers' Transaction Services Group, the number of IPOs in the U.S. has declined for three straight quarters. So far this year, there have been only 54 public offerings, raising a mere $31.2 billion. This compares to 195 offerings in the same period last year (with $44.7 billion raised). Keep in mind that this year's numbers were heavily impacted by the Visa Inc. (NYSE: V) offering, which raised $17.8 billion.
As for Q3, there were 12 IPOs (for a total of $1.9 billion). This was the slowest since 2003.
Of course, the credit crunch has been a big culprit. But there are other reasons. For example, the various hedge fund failures have been a big problem. Plus, as the U.S. economy slips into recession, there's little appetite for risky growth stocks.
However, when the IPO market comes back -- and it certainly will -- it's likely that we'll see high-quality companies go first. After all, investors will want top quality. What's more, the valuations are likely to be attractive. But, it could easily be another year until this happens -- as the banking system stabilizes and growth perks up in the U.S. economy.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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