The market for initial public offerings surged early this
year, with 31 deals raising $7.6 billion in the first quarter,
but few young growth companies are cheering. The IPO market
resembles a giant debt-swap in which private equity firms like
Blackstone Group and Madison Dearborn Partners and corporate
titans such as Pfizer are cashing in on a buoyant equity market
to unload bulky assets. By contrast, few venture capital-backed
companies are managing to go public.
On April 18, SeaWorld Entertainment priced a $702 million
IPO after attempts to sell the company in the private market
failed. In 2009, the $210 billion-in-assets Blackstone Group
paid $2.3 billion to buy SeaWorld from multinational brewer
Anheuser-Busch InBev. SeaWorld paid Blackstone a $100 million
dividend in 2011, then took on additional debt in March 2012 to
pay the firm an additional $500 million dividend. As part of
the IPO, SeaWorld offered 10 million shares at $27 apiece,
raising $245.4 million net of expenses. The company said it
used the proceeds to pay down $177 million of debt and to pay
Blackstone a $47 million fee for terminating a management
advisory agreement. Blackstone and shareholders affiliated with
it offered 16 million shares in the IPO.
More such deals could be in the offing as private equity
funds come under pressure from their investors for increased
capital distributions, market watchers say.
Meanwhile, the year got off to a dismal start for
venture-backed IPOs, with activity falling to the lowest level
in three years, according to the National Venture Capital
Association (NVCA) and Thomson Reuters. Venture-backed IPOs
raised only $672 million from eight offerings in the first
quarter, a decline of 52 percent from the amount raised in the
fourth quarter of 2012, and a decline in both deals and dollars
raised in the first quarter of 2012. (In the first quarter
of 2012, venture-backed IPOs raised $1.68 billion from 19
Political, taxation and sequestration concerns
weighed even more heavily on the exit market for emerging
growth companies, noted John Taylor, head of research for
the NVCA, in a press release from the Washington, DC-based
venture capital trade group.
The performance of the quarters IPOs was lackluster.
The average aftermarket return dropped to 4.9 percent from 11.2
percent in the first quarter of 2012, according figures
compiled by Greenwich, Connecticut-based Renaissance Capital,
an advisory firm that tracks IPOs and IPO markets. The average
first day return declined to 12.6 percent from 18.4 percent a
year earlier. And the average total return dropped to 18.3
percent from 32.2 percent in the first quarter of 2012.