Q3 2016 Middle Market Equity Capital Report: Pockets of Strength and Reasons for Optimism
Many of the same market conditions from Q2 continued in Q3 and transaction activity reacted in much the same way. There is still plenty of private capital available in the market, public investors are more selective in pursuing new opportunities, the stock markets have stabilized and seem to have adjusted to current market conditions, and uncertainty surrounds the results of the U.S. presidential election.
Once we move beyond the high level Q3 data indicating that both IPOs and proceeds raised were down year to year, several data points suggest pockets of strength and optimism. Yes, IPO activity was down in Q3, but the decrease was far less severe than in Q1 and Q2. It's too early to suggest a complete comeback in IPO activity, but an 11% decrease is far better than a 78% or 46% decline.
We are encouraged to see improvement in the proportion of small (proceeds under $50M) IPOs and middle market (operating companies with market values between $10M and $2B) IPOs as both help fuel the growth of the U.S. economy. Technology sector IPOs, stagnant for the past several quarters, improved in Q3 offering hope to emerging technology companies and their investors, who at one point depended on the IPO to provide much needed growth capital.
We hope you find the contents of our report to be informative and helpful as you consider sourcing capital.
To learn more about liquidity and capital formation issues, including additional reports on IPO activity, visit the CohnReznick Liquidity and Capital Formation Resource Center.