A new research study from US accounting firm CohnReznick shows that despite an historic year for middle market deal activity, including year over year gains and high returns, middle market IPO activity in 2014 wasn’t enough to stimulate large scale economic growth.
In terms of the broader market, the 2014 calendar year was the best year for IPOs since 2000, with 278 IPOs generating more than $90 billion in proceeds. However, IPO activity among the middle market was much more modest, with just 237 IPOs raising nearly $28 billion in 2014, compared with 190 IPOs raising more than $31 billion in 2013.
This represents a 24 percent increase in the number of IPOs but an 11.4 percent decrease in proceeds year over year. CohnReznick defines the middle market as companies with market cap between $10 million and $2 billion, excluding funds and SPACs.
Despite this, the study also points to a handful of proposed changes that could make 2015 a high growth year in terms of capital formation. Those changes include an update to Regulation A+ rules which is forthcoming from the SEC and would spur growth in the small and micro-cap IPO markets. The SEC’s proposed tick size pilot program would also provide greater allowances for small and micro-cap IPOs.
Financing in 2014 is also on pace to beat each of the last 13 years, and is on pace to remain elevated through the next year, according to report data. Provided interest rates remain relatively low for the first half of the year, and the appetite for IPOs remains steady, authors of the CohnReznick report say 2015 could start at roughly the same elevated pace as we ended 2014.