IPO Pipeline Pumps Up the Volume in First Quarter

5/23/11Follow @bvbigelow

A recent study of IPO filings by the Ernst & Young accounting firm shows that 47 companies filed for initial public offerings during the quarter that ended March 31, and a total of 125 companies are waiting to go public on U.S. markets.

Of the 125 companies in the pipeline, 25 are based in California, including The Active Network, a San Diego-based Internet company from the dot-com era that is expected to go public Wednesday. That represents a 56 percent increase over the 80 companies that were registered to go public at the end of the first quarter of 2010.

Five Massachusetts-based companies were ready to go public at the end of March, according to Ernst & Young’s tally. The firm also showed four New York companies were awaiting IPOs, three in Michigan, and one in the state of Washington. Ernst & Young did not break out data for Northern California.

The total dollar amount sought by all 125 companies was $18.4 billion, a 61 percent gain in aggregated valuation from the $11.4 billion for the same quarter in 2010. But it was down from the $23.1 billion total valuation sought by all companies during the fourth quarter of last year.

There also just appears to be more IPO-related activity in general. The Ernst & Young report found that 27 companies went public during the first quarter. Nine withdrew their IPO paperwork, four postponed their IPOs, and three others that have been waiting more than a year to go public were excluded from the report.

A flurry of news since the report’s release just over a week ago has already changed the year-to-date IPO figures. Westport, CT-based Advanced BioHealing, which has extensive operations in San Diego, was scheduled to go public on May 18—but was instead acquired by Irish drug giant Shire Pharmaceuticals on May 17, the day after Ernst & Young released its IPO pipeline report. Mountain View, CA-based professional networking company LinkedIn went public on May 19, as Wade reported. In another move that changes the tally, San Diego-based Fallbrook Technologies withdrew its IPO registration at the end of April.

Still, “As you step back, you can see it’s less of a spike in IPO activity and more of a continued, robust increase,” says Mark Sogomian, an Ernst & Young partner in Los Angeles who follows IPO activity. In addition to The Active Network, which provides online registration services, San Diego-based companies waiting to go public are Peregrine Semiconductor, Ambit Biosciences, and IASO Pharma.

Sogomian also noted that new IPO filings by large, private equity-backed companies are more than replenishing the PE-backed companies that are going public, so the overall number of companies waiting to go public has actually been increasing. At the end of the first quarter, 39 PE-backed companies were in the pipeline.

Sogomian explained that the private equity-backed companies in registration tend to be more mature than venture-backed companies, with higher revenue and more employees.

The three largest pipeline companies to go public during the quarter were Nashville, TN-based HCA Holdings (registered for $4.4 billion); Houston’s Kinder Morgan (registered for $3.3 billion); and the Netherlands-based Nielsen Holdings (registered for $1.9 billion). All three were private equity-backed companies.

“We expect to see continued solid IPO activity, especially from these PE-backed companies,” Sogomian said.

Ernst & Young also noted that technology companies specializing in software, hardware, and social networking represented a majority of new registrants, with an overall valuation of $4 billion. At the end of March, the firm had counted seven biotechs, 10 pharmaceutical comapnies, 27 technology firms, one telecom firm, and one media company in the IPO pipeline.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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