Current IPO Market Environment - IBF May 2005
8
Jefferies & Company, Inc. IPO Market Revival? June 2005 CONFIDENTIAL DRAFT
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Transcript of Current IPO Market Environment - IBF May 2005
Jefferies & Company, Inc.
IPO Market Revival?
June 2005
CONFIDENTIAL DRAFT
Quarterly Technology IPO Issuances
- -
2
7
9
11
4
2221
3
9
12
-
5
10
15
20
25
Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05
Num
ber o
f Dea
ls
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Amount Raised ($m
illions)
Number of Deals Amount Raised
Note: Technology defined per SDC Platinum high technology industry classification.
2
LTM Technology IPO Issuances by Subsector (1)
Software19%
Internet19%
IT & Network Services24%
Semiconductors9%
Network Infrastructure7%
Computing Equipment3%
Other19%
Note: Technology defined per SDC Platinum high technology industry classification. (1) As of May 20, 2005.
3
LTM % Change – Price Offer to 1 Day (1)
16.0%
27.1%
15.0%
23.0%
6.1%
-1.9%
8.9%
12.1%
22.8%
11.6%
9.3%
11.7%
27.5%
10.9%
16.1%13.9%
28.6%
2.3%
34.5%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05
Median14.4%
Note: Technology defined per SDC Platinum high technology industry classification. (1) As of May 20, 2005.
4
LTM % Change – Price Offer to Current (1)
Note: Technology defined per SDC Platinum high technology industry classification. (1) As of May 20, 2005.
16.5%23.8%
-25.7%
-52.5%
0.3%
16.6%
125.1%
17.3%
29.6%
81.6%
18.6%
-4.2% -2.8%-12.9% -14.5% -18.4%
2.6% 1.4%3.0%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05
Median
2.6%
5
Size And Profitability Have Become Important Determinants for Technology IPOs
($Millions)
Median LTM Revenue
$44.8
$77.1$64.0 $55.0
$85.0
$137.5
$104.2
$72.5
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005
Overall Average = $80.0 M
Median LTM EBITDA Margin
20.1%
8.7%
28.2%
10.4%16.5%
11.8%
37.3%31.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005
Overall Average = 20.6%
7
Summary Of Median Performance For Technology IPOs Since Mid-2003
(1) As of May 19, 2005. Source: Jefferies Broadview’s IPO Database / Hoover’s IPO Central / Capital IQ
H2 2003 H1 2004 H2 2004 YTD 2005(1)
% Companies with Revenue < $25MM 11% 10%
% Companies Unprofitable 16% 19%
Median Quarters of Profitability 6 5
% Companies Trading Below IPO 37% 57%
34%
32%
3
51%
0%
20%
9
67%
IPO Statistics(1)
H2 2003 $85,000 $72,493 36.3% 6 4.5% 6.6%
H1 2004 $86,000 $87,357 54.8% 5 7.6% (16.3%)
OfferingAmount
TTMRevenue
TTMRevenueGrowth
Quarters ofProfitability
EBITMargin
% ChangeFrom IPO(1)
TTM
H2 2004 $74,300 $47,447 60.3% 3 4.4% (7.3%)
YTD 2005 $154,000 $85,044 43.0% 9 22.3% (10.3%)
Period
Median Profile(1)
NASDAQ Performance
During Period
+22.1%
+2.2%
+7.9%
(4.2%)
6
Technology Capital Markets Environment Today
Cautious outlook has impacted the equity markets
– Interest rate increases have caused equity mutual fund flows to decline to $6.0B per month in 2005YTD vs. $10.3B in 1H04
– S&P and NASDAQ indices down 4.2% and 9.3% since 1/1/05
– High-profile IPOs have failed to generate investor interest
Boise Cascade withdrawn
Lazard and Warner Music Group trading below offer price
– Public companies are increasingly going private to escape the regulatory burdens and poor returns of public listings (e.g. SunGard, Maytag)
The Technology IPO market has contracted
– The number of quarterly IPO issuances has dropped 50% from Q4 ’04 to Q1 ’05 and continues to decline in Q2 ‘05
– Median offer price to current price percentage change for Technology IPOs is (3.5%)
– Over 60% of 2005YTD IPOs are trading below their offer price
– SSA Global recently cut the price of their IPO to $11 from an initial range of $13-$15 and cut the size of the IPO from 14.3 to 9.0 million shares, raising $99 million vs. the original filing size of $200 million
SSA opened flat on its first day of trading
The IPO bar is high
– 2005YTD IPOs have a median EBIT margin of 22.3% and 9 quarters of profitability at pricing
– No enterprise software vendors have filed for an IPO since November 2004
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