The Strongest Year for U.S. IPOs Since 2000

VMware executives ring the NYSE opening bell to celebrate the company's initial offering.
VMware executives ring the NYSE opening bell to celebrate the company's initial offering. (Nyse Euronext Via Bloomberg News)
Associated Press
Sunday, December 23, 2007

NEW YORK -- The U.S. market for initial public offerings of stock had a strong year in 2007, even as the subprime-mortgage and credit-market crises unfolded, according to an annual review by the IPO research firm Renaissance Capital.

The 2007 IPO market has had the highest volume and largest proceeds since 2000, with 231 offerings raising $53 billion as of Dec. 17.

The four largest issuers in 2007 were financial companies, but financial offerings were among the biggest disappointments of the year. Shares of Blackstone Group, whose $4.1 billion IPO was the largest, are trading more than 20 percent below the offering price of $31.

Instead, the IPO market's performance was driven by Chinese companies and some blockbuster U.S. technology deals.

There were more than 50 technology IPOs in 2007, including VMware, a spinoff from EMC. It was the largest tech IPO since Google, raising more than $1 billion and gaining 76 percent in its first day of trading. VMware is now the fourth-most-valuable software company in the world, behind Microsoft, Oracle and SAP.

Companies based in China accounted for half of the 25 best-performing IPOs this year, including solar-cell maker JA Solar Holdings, the top-performing company so far in 2007. JA Solar shares have more than quadrupled since its IPO, priced at $15, in February. In total, there were 34 Chinese IPOs on U.S. exchanges in 2007, nearly four times as many as in 2006.

Average total return on IPOs, however, did not match the average returns for 2003 to 2006. Analysts attributed the disruption to the dip in Asian stocks in the spring and then the fallout from the mortgage crisis.

"During these downturns, investors were very quick to bail out of the portions of their portfolios in which they had the least experience and confidence -- the recently acquired IPOs," Renaissance Capital said in its report. "This may explain why the follow-on performance in the aftermarket was less than in previous years."

Renaissance Capital noted that its Renaissance IPO Index, which was launched in September, is up more than 15 percent for the year and outperforming all the major indexes.

For 2008, Renaissance Capital analysts predict that technology and energy companies will show strength. The analysts also forecast continued IPOs from China in advance of the Olympics.

Renaissance analysts noted that Visa and Kohlberg Kravis Roberts are the only high-profile financial firms in the IPO pipeline.

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