IPO Activity Predicted to Increase During Remainder of 2011

But the retail sector remains a question mark. According to the 2011 BDO IPO Halftime Report, a majority (59%) of capital markets executives at leading investment banks believe U.S. IPO activity will increase in the second half of the year, with almost a fifth (18%) describing the increase as substantial. Overall, bankers predict a 9.5% increase in the number of U.S. IPOs in the latter half of 2011. They anticipate these offerings will average $368 million, which projects to more than $57 billion in total IPO proceeds on U.S. exchanges in 2011.

Amid talks of a tech bubble, it’s no surprise that the sector has led all industries in U.S. IPOs so far this year, and 74% of investment bankers predict even more tech offerings during the second half of the year. By contrast, the consumer/retail sector comes in at the bottom with just 22% of bankers expecting IPO activity to increase. Most bankers expect IPOs in the consumer/retail sector to remain flat (41%) or decrease (36%) in the second half of the year.
Industry Increase Flat Decrease
Technology 74% 21% 4%
Energy/Natural Resources 69% 20% 11%
Healthcare 54% 39% 7%
Biotech 52% 39% 9%
Media/Telecom 47% 34% 19%
Real Estate 39% 38% 22%
Financial 32% 44% 24%
Industrial/Manufacturing 23% 55% 22%
Consumer/Retail 22% 41% 36%
(Proportions of Capital Markets Executives expecting IPO activity to increase, remain stable or decrease in specific industries during remainder of 2011.

Why the low expectations? Toys R Us may offer a potential explanation. The company has made it through the SEC review process, and could launch an IPO at any time. Still, it’s expected that they will wait until next year due to lingering concerns over the stability of markets and the fast-approaching holiday season. Many retailers, Toys R Us included, make upwards of 40% of their annual revenue during the holidays, making the fall a difficult time to focus on anything outside of sales.

But it’s not all quiet on the retail and consumer product front. Skullcandy Inc. and Francesca’s Holdings Corp. both went public during the busy and highly-anticipated IPO week of July 18th. Although Skullcandy’s IPO was disappointing, with shares trading flat by the end of the day, Francesca’s exceeded expectations. The women’s jewelry and clothing boutique closed up 63% from its initial public offering price of $17. The coffee and tea sector also seem to be outperforming with private-equity backed Teavana pricing last week and Dunkin Donuts stealing the show with a highly successful, private equity backed IPO last month. This is in line with our study — two-thirds (67%) of bankers cite either private equity (39%) or venture capital (28%) portfolios as the greatest source of IPOs in the second half of the year.

What is your outlook for IPOs in the consumer/retail sector for the remainder of the year?