Shares of action camcorder maker GoPro Inc. surged in their initial public offering Thursday, and no one was happier than the private equity firms that got to cash in on the deal.
This year's IPO boom has helped to propel the stock market, boost economic confidence and beef up the returns of millions of 401(k) retirement accounts.
But perhaps more than anything, it's been a boon for private equity and venture capital firms that have rushed to capitalize on the hot IPO market, especially for tech and tech-related companies.
Even before the 2008 global financial crisis, the subdued IPO market over much of the last decade limited the ability of investment firms to cash out their holdings.
With the new-issue market now surging at its fastest pace in more than a decade, professional investors are selling at a frenzied pace, in part because of uncertainty about how long the rally will last.
"We're talking to companies every day that are lining up to get into that window while it's still open," said Doug Regnier, head of West Coast IPOs at Ernst & Young, the accounting and professional services firm.
Venture investments typically are made early in a private company to help it grow into a publicly traded company that allows investors to take their profits more easily in Wall Street trading.
There have been 162 IPOs so far this year, a 72% jump from the comparable period a year ago, according to the accounting firm.
The deals raised $35 billion, with selling by private equity and venture capital firms accounting for $28.5 billion, or 81% of the total, the firm said. By contrast, selling by investment funds accounted for 67% of the $62 billion raised altogether last year.
In many cases, private equity and venture capital firms sell relatively small stakes in IPOs and schedule secondary offerings months later to unload more when the price often is higher, said Francis Gaskins, research director for equities.com in Marina del Rey.
"The window is open now, but in the IPO market, things can change quickly," Gaskins said.
In GoPro's debut, investment firms Riverwood Capital, Foxteq Holdings and Sageview Capital Partners all sold small stakes.
It'll be much the same Friday when arts-and-crafts retailer Michaels Cos. is expected to make its public debut. That will give Wall Street giants Blackstone Group and Bain Capital Partners a chance in the future to sell shares they've held since before the Great Recession.
Blackstone and Bain are not planning to sell shares in the IPO. However, the two firms received a $714-million dividend last year that was financed with debt. The IPO will go toward repaying the debt. (continued...)
© 2014 Los Angeles Times (CA) under contract with NewsEdge. All rights reserved.
Posted: 2014-07-01 @ 3:08am PT
Great article. There are more than 150 companies that have gone public since 2013. The favorable market condition and the relaxed IPO process due to the JOBS act has heightened interest in IPOs among emerging growth companies. I work for McGladrey and there's a whitepaper on our website that offers good information on the above topic that readers will find interesting.