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REPORT: 2014 Middle Market U.S. IPO Activity Increases Over 2013


12/22/14

Action in Washington Necessary to Stimulate Middle Market Public Capital Formation

NEW YORK – Despite year over year gains and historic returns, middle market initial public offering (IPO) activity in 2014 remained behind the level necessary to stimulate large scale economic growth, according to new research released today by CohnReznick LLP, a top ten accounting, tax, and advisory firm specializing in middle market companies.

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% increase in the number of IPOs but an 11.4 % 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.

“When it comes to middle market IPO activity, 2014 was a good year, but not a great year,” said Dom Esposito, partner and leader of CohnReznick’s National Liquidity and Capital Formation Advisory Group. “Middle market companies represent a powerful growth engine for the economy and providing opportunities for capital formation among this sector represents a tremendous opportunity for Washington to stimulate job growth.”

The CohnReznick Middle Market Equity Capital Report is the fourth in a series of quarterly reports from CohnReznick examining the state of the IPO market and its impact on middle-market businesses.

“Looking beyond the remarkable broader market IPO headlines of the past year, what we are seeing is a flat trajectory for the middle market,” said Alex Castelli, partner with CohnReznick’s National Liquidity and Capital Formation Advisory Group. “However, a number of factors are at work in Washington that may make 2015 a watershed year for middle market public capital formation.”

These potential changes include:

  • Regulation A+ rules forthcoming from the SEC would be a boon to the sub $50 million IPO market.
  • Congress is expected to develop and ready a JOBS Act 2 for the President’s desk that could have major implications for middle-market capital formation.
  • The SEC Tick Size Pilot will advance, potentially stimulating capital formation activity in the middle market.
  • Discussion and possible legislation to create a new form of “Venture Exchange” will be optimized to better support middle market companies.
     

The full study and research will be released later this month and will be available at www.cohnreznick.com/capitalformation.

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