After two straight years of decline, the IPO market is on pace to grow significantly this year. There were just 106 public offerings in 2016, which represented a 35.4 percent decrease from 2015. However, the first half of 2017 has been promising for the public markets: 77 companies have already gone public through the second quarter alone, according to Renaissance Capital. The second quarter alone, in which 52 companies went public, marks the best single quarter for public offerings in two years.
Chris Mann, managing partner of MorganFranklin Consulting, said the increase in pace of IPOs could be a sign that companies are more confident in the stability of the economy. Mann predicts the number of public offerings to grow throughout the year.
“We expect the growth to continue,” Mann said. “We think there are still a number of companies that have continued to delay their IPOs. That creates a backlog and should set us up for a strong second half of 2017.”
Thanks to the extended period of low market volatility, Mann said, he remains optimistic about the prospect for more public offerings moving forward.
Going public, like much else, has its pros and cons. A newly public company can raise a great deal of capital in a short time, often seeing its valuation jump as well if speculative investors take an interest in its IPO.
“Quick access to a significant amount of capital allows companies to do the things they want to do, whether that’s growing through acquisitions, investing in new technology or finding new potential customers,” Mann said.
On the other hand, going public means opening up the company’s finances to public scrutiny, which also reveals the health of the organization to competitors.
“It involves basically managing your business so that investors and analysts have complete visibility into what’s going on,” Mann said. “[That’s especially true] when you’re in a situation issuing guidance and expectations to the street. That presents a challenge, as it can create volatility in your stock price depending on how your results are perceived by the investment community.”
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