By Ciara Linnane, MarketWatch
Correcting ninth paragraph to clarify that the average energy IPO in 2014 delivered a negative return, and not that the number of IPOs was lower than in 2013
NEW YORK (MarketWatch) — Bankers are expecting the number of initial public offerings on U.S. exchanges to grow in 2015, an upbeat view given the recent slide in oil prices, the prospect of higher interest rates and the lack of a deal on the scale of Alibaba Group Holding Ltd.
Executives handling such deals said they expect the number of U.S. IPOs to increase 2% in 2015 and generate almost $85 billion in proceeds, a total that is below that for 2014, according to a poll by consulting firm BDO U.S.A. LLP published Tuesday .
“Given the robust performance of the U.S. IPO market during the past two years, this forecast of continued growth in the number of offerings — even 2% — is actually quite positive,” said Wendy Hambleton, partner in the capital markets practice at BDO U.S.A. “ If accurate, it will represent a fourth consecutive year of increased IPO activity on U.S. exchanges.”
However, as the U.S. IPO of Chinese e-commerce giant Alibaba /zigman2/quotes/201948298/composite BABA +8.95% accounted for more than a quarter of 2014’s proceeds, the expectations of a rise in deal value do look optimistic, she said.
IPOs of companies listing in the U.S. raised $96 billion in 2014, according to Dealogic, which counted a total of 293 deals, the most since 2000. Alibaba raised $25 billion, making it the biggest IPO in the world, topping Agricultural Bank of China Ltd.’s dual-listed $22.1 billion deal /zigman2/quotes/207749118/composite ACGBY +0.51% /zigman2/quotes/204629388/delayed CN:601288 -1.89% /zigman2/quotes/200705246/delayed HK:1288 -0.98% completed in July 2010.
However, there are a number of big Silicon Valley-funded startups that could hit the U.S. stock market if conditions are right. Ride-sharing service Uber, payment system Square or room-sharing service Airbnb have all been mooted as potential IPO candidates. All three currently have valuations of well above $1 billion. Uber has the highest price tag at $41 billion, following its last funding round in early December.
“I don’t think we’ll see an Alibaba, but the combination of some of these startups could yield strong results if they choose to come to market,” said Hambleton.
Bankers are expecting the technology, biotech and health-care sectors to dominate the 2014 IPO calendar, while energy and natural resources are expected to see fewer listings following the recent slide in oil prices.
In 2014, the average energy IPO delivered a negative return, “so already the industry was on the decline,” said Hambleton. .
The forecast for the IPO market comes as the S&P 500 has fallen about 3% over the first three trading days of the year. Bankers cited global political instability as the biggest risk to new stock listings this year, followed by the Federal Reserve’s paring back of stimulus, turmoil in Europe, a weak Chinese economy, and the threat of tax increases.
The companies already on the IPO slate include hamburger chain Shake Shack Inc., chemicals company Univar, real-estate investment trust Great Ajax Corp. and retail bank OneMain Financing Holdings Inc.