The US capital markets continue to be an attractive destination for companies looking to raise capital. For companies serious about going public in the US- the time to prepare is now. PwC can help you navigate through this unique transformational event.
We sat down with Richard Sola, Director in PwC's Capital Markets and Accounting Advisory Services practice, to get his observations on the US capital markets and insight as to what companies can do to prepare for a successful IPO in the US.
Why do the US capital markets continue to be such an attractive destination for new IPOs?
Richard Sola: IPO activity in the US saw a surge in 2013 that has continued through the second quarter of 2014- both from a volume and value perspective. In fact, the second quarter of 2014 saw the highest quarterly deal volume since the fourth quarter of 2007. In light of the current macro economic conditions, new equity offerings in the US have proven to be an attractive opportunity for investors searching for yield in an otherwise sluggish global economy. The one day and 90 day IPO returns have continued to outperform the broader stock markets. Volatility, as measured by the VIX, a so called "investor fear gauge", has remained low, thereby keeping the IPO window open for an extended period of time. A third but very important contributing factor is the impact of the JOBS Act. The JOBS Act was enacted in 2012 with the objective of providing easier and broader access to the US capital markets for smaller companies- generally those with less than $1 billion in revenues. The Jobs Act provides relief from a number of financial reporting and disclosure requirements that would otherwise be applicable to a company going public in the US. The reduced requirements have generated a flurry of IPO activity in the US with new issuers qualifying as "emerging growth companies" representing a significant majority of all IPO activity.
Let's talk a little more about the JOBS Act. What benefits are available to companies listing in the US and does the relief extend to companies that are not domiciled in the United States?
Sola: First off, to be clear, the relief provided for under the JOBS Act is available to any company seeking to list in the US regardless of whether they are domiciled in the US or non-US domiciled companies that qualify as a "foreign private issuer" under the US securities laws. While the legislation provides for a number of reduced filing and reporting requirements, we have seen the following provisions as the ones most often leveraged by companies that qualify as an an emerging growth company ("EGC"):
What advice would you give to a company thinking about or beginning to plan for an IPO in the US?
Sola: Embarking on an IPO is among the most challenging and most rewarding transactions that an organization can undertake. Planning, executing, and managing an IPO is a complex task for any organization, especially for its management team. The better prepared a company is, the more efficient and less costly the process can be. In our experience, a successful US IPO will include the following key characteristics: