Corporate Financing Analysis - US IPOs Continuing To Enjoy The Bounce While It Lasts - 15 MAY 2017


With investor optimism at its highest level in over two decades - evidenced by the CBOE Volatility 'fear gauge' VIX index falling to a 24-year low last week - now is the time for boardrooms to send their firms public in the US, especially as we see the window for making such deals starting to close over the coming months as US stocks underperform globally. While the perfect storm for first-time share sales in the US is the main story, we note that the latest USD1bn+ US float serves to add credence to an additional trend that we have been consistently highlighting: private equity firms will continue to favour the equity capital markets (ecm) arena, rather than the M&A market, to make exits from their portfolio investments.

Rocky Mountain High Float

The bullish global equities backdrop together with strengthening economic growth and dwindling fears surrounding further geopolitical shocks have created a fertile backdrop for floats such as the one we are expecting this month from engineering and industrial systems manufacturer Gardner Denver Holdings. The firm is looking to raise around USD1.0bn on the New York Stock Exchange (NYSE) from the sale of 41.300mn shares between a range of USD23 to USD26, with an overallotment option of an additional 6.195mn shares for underwriters. At the midpoint of this indicative range it would give the firm a fully diluted market valuation of USD5.0bn. Goldman Sachs, Citi, UBS Investment Bank, PE giant Kohlberg Kravis Roberts (KKR), which backs the firm, Simmons & Co, Deutsche Bank, Baird, Credit Suisse and Morgan Stanley are all serving as joint bookrunners on the deal, the proceeds of which will reportedly be used to pay down some of the firms' debts and ultimately help the company grow. We note that the deal is the largest of a string of deals that are set to hit US exchanges during the month of May in the run up to Memorial Day. Other deals that are expected include those from real estate developer Five Point, oilfield equipment provider Solaris Oilfield Infrastructure and software firm Appian, all of which will add to the USD15.4bn in proceeds already raised by US floats so far this year - a 404.0% increase from the same stage last year, according to Renaissance Capital data.

Building Steam
US IPO Proceeds Raised By Deal Value, USDbn
Source: www.renaissancecapital.com , BMI

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