IPO Activity in First Nine Months of Year Eclipses 2013 Total
Twenty-three venture-backed initial public offerings (IPOs) raised $2.6 billion during the third quarter of 2014, marking the sixth consecutive quarter to see 20 or more venture-backed IPOs, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). Bolstered by biotechnology offerings, third quarter IPOs pushed the total number of offerings during the first nine months to 88, eclipsing full year 2013 levels. For the third quarter of 2014, 119 venture-backed M&A deals were reported, 32 of which had an aggregate deal value of $7.9 billion, more than double the disclosed value recorded during the second quarter of this year. Average deal size during the third quarter totaled $248.2 million, a marked increase compared to the second quarter of 2014.
“Extending the streak to six consecutive quarters with over 20 venture-backed IPOs, there’s clearly a strong demand in the public markets for high-growth companies on the cutting edge of innovation,” said Bobby Franklin, President and CEO of NVCA. “With the biotechnology sector continuing to lead the way, over three-quarters of the venture-backed exits in the third quarter were life sciences IPOs. This is welcome news for a segment of the innovation ecosystem that has been short on exits and new fundraising in recent years. We are hopeful this streak will continue but we need some assistance from policymakers in Washington, DC to help foster a more favorable funding environment for the next generation of groundbreaking life sciences companies.”
IPO Activity Overview
There were 23 venture-backed IPOs valued at $2.6 billion in the third quarter of 2014. By number of deals, quarterly volume decreased 18 percent from the second quarter of this year and registered a 48 percent decrease, by dollars, compared to the previous quarter.
Led by the biotechnology sector, 18 of the 23 offerings during the quarter were life sciences IPOs, representing over three-quarters of the total number of offerings during the third quarter. This marks the sixth consecutive quarter for double-digit listings in the life sciences sector.
By location, 18 of the quarter’s 23 IPOs were from U.S.-based companies. Two venture-backed IPOs were from companies based in Israel, raising a combined $1.1 billion. The third quarter of 2014 also saw venture-backed offerings from companies based in China, Germany and Switzerland.
In the largest venture-backed IPO of the quarter, Mobileye NV (MBLY), an Israel-based developer of advanced driver assistance software, raised $1.0 billion and began trading on the New York Stock Exchange on July 31st. The company is currently trading more than two times above its $25 offering price.
Twenty companies listed on the NASDAQ stock exchange during the quarter, while three companies listed on the New York Stock Exchange. All but one of this quarter’s 13 biotechnology IPOs listed on the NASDAQ stock exchange.
Fourteen of the 23 companies brought to market this quarter are currently trading at or above their offering price. There are 48 venture-backed companies currently filed publicly for IPO with the SEC. This figure does not include confidential registrations filed under the JOBS Act, where many observers believe the majority of venture-backed companies now file.
Mergers and Acquisitions Overview
As of September 30th, 119 venture-backed M&A deals were reported for the third quarter of 2014, 32 of which had an aggregate deal value of $7.9 billion, the strongest quarter by disclosed deal value since the third quarter of 2012 and just the third quarter to see over $7.0 billion in disclosed M&A value over the past five years. The average disclosed deal value was $248.2 million, a marked increase compared to the second quarter of this year.
The information technology sector led the venture-backed M&A landscape with 91 of the 119 deals of the quarter and had a disclosed total dollar value of $4.6 billion. Within this sector, computer software and services and internet specific deals accounted for the bulk of the targets with 46 and 33 transactions, respectively, across these sector subsets.
The largest venture-backed M&A transaction closed during the third quarter was Facebook’s $1.9 billion purchase of Oculus VR, an Irvine, California-based developer of virtual reality headsets. Amazon.com Inc’s $970 million acquisition of San Francisco, California -based Twitch Interactive ranked as the second largest venture-backed M&A deal during the quarter.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 47 percent of the total disclosed transactions during the third quarter of 2014. Venture-backed M&A deals returning less than the amount invested also accounted for 25 percent of the quarterly total.
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