IPOs reach near-record highs in Q1

The first quarter of 2014 marks one of the best for US initial public offerings in recent years.

There were 71 public company debuts during Q1, representing a 109 percent increase over the 34 IPOs during the same period last year, according to new research from PwC.  Proceeds from IPOs during the first three months of the year reached $11 billion, a 41 percent increase over the $7.8 billion raised during Q1 2013.

Data from IPO research firm Renaissance Capital largely corroborates the PwC study. Renaissance shows 64 IPOs pricing in the US this year, raising $10.b billion – a 39.5 percent increase.

“The improving domestic economy, rising confidence among CEOs and continued record low interest rates all combined to fuel very strong activity in the US capital markets during the first three months of the year,” said Henri Leveque, leader of PwC’s US Capital Markets and Accounting Advisory Services, in a statement. “Given the strength of today’s equities markets, investors are increasingly focused on pursuing growth stocks across multiple sectors, widening the runway for well-prepared companies with strong growth rationales to pursue IPOs.”

Healthcare focused IPOs dominated the market in Q1 with 35, or nearly half the total IPOs for the quarter.  Despite the high volume of offerings, PwC data shows that the IPOs only raised a total of $2.2 billion underscoring the developmental nature of healthcare IPOs, especially biotechnology and biopharmaceutical IPOs.

The IPO of Venrock-backed Castlight Health was a standout for the quarter. Shares jumped 149.1 percent on the first day of trading. Castlight is a health software company and represents a less developmental side of the healthcare sector.

In addition to IPOs, PwC data shows that refinancings are also on the rise. A total of 146 issuances worth $74.9 billion were completed during the first quarter of this year, compared to 146 issuances worth $68.6 billion in the final quarter of 2013, and 176 issuances worth $90.4 billion in last year’s first quarter.

“In addition to the strong IPO market, we’re continuing to see significant refinancing activity, as management teams seek to sure-up balance sheets and build liquidity ahead of an anticipated increase in interest rates,” said Neil Dhar, PwC’s US Capital Markets Leader, in the report. “Both IPOs and high yield debt issuances remained attractive to investors as they continued their search for yield.”