The number of companies going public in the United States continues to increase. According to an analysis of our IPO database, there were 91 IPOs in the second quarter of 2014, an increase of 17 percent compared to the 75 IPOs completed in the first quarter of the year. In all, 2014 has seen 166 companies go public, raising over $33 billion in the process.
For the sake of comparison, there were 109 IPOs over the first two quarters of 2010, which raised about $27 billion. Overall, then, IPO activity in the first half of 2014 represents a 52% increase in the number of IPOs and a 22% increase in their initial market valuation.
Companies in the biotechnology, health care, and pharmaceutical industries continue to lead the way. We counted 41 IPOs of companies in this industry during the first half of 2014, representing about 25% of all IPOs. This should come as no surprise, since these industries have been “hot” for a long time now. Money in the form of private equity is also flooding into these industries. There were more than 100 private placements in the pharmaceutical industry during the first quarter, raising more than $670 million.
“New IPOs continue to fuel a strong pipeline this quarter as capital is readily available,” said Jackie Kelley, EY Global IPO leader. “PE and VC’s are driving IPOs as they seize the opportunity to realize value for investors, confidence continues to build as the VIX is now at the lowest level since the start of 2007, and with M&A hot again, companies have more options to exit. Dual tracking has become popular again.”
Auditor Market Share
The Big Four, of course, audit the vast majority of these IPO companies. In Q2 2014, the Big Four had 75% of the IPO market share between them.
Auditor market share for 91 #IPOs in Q2 2014: PwC (26%), Deloitte (20%), EY (16%), KPMG (13%), BDO (4%), GT (4%), others (17%). #ipos2014
— Audit Analytics (@AuditAnalytics) July 28, 2014
Interestingly, EY, which has been the dominant leader in the IPO market for a while, fell behind PwC and Deloitte in the second quarter. Since the beginning of 2011, EY has been the auditor for about 28% of all IPO companies, followed by PwC with 21%. We’ll be keeping an eye on this to see whether there’s a shift in the market, or if this most recent quarter was just a blip.
In the first quarter of 2014, EY audited 37% of IPO companies, well ahead of other auditors, while the Big Four had 72% of the total market.
Auditor market share for 75 #IPOs in Q1 2014: EY (37%), PwC (16%), DT (12%), KPMG (7%), BDO (5%), other (23%). #ipos2013 — Audit Analytics (@AuditAnalytics) April 10, 2014
18 of the 43 IPO companies (42%) audited by EY disclosed fees for the fiscal year ended 2013. Total fees for these companies were $23.6 million, of which $1.5 million related to non-audit services.
Seven IPO companies (19%) audited by PwC disclosed fees, which amounted to $11.6 million in total, with $2.4 million in non-audit fees.
Six companies (22%) audited by Deloitte disclosed $27.6 million in total fees, $8.2 of which was for non-audit services. The bulk of these fees were from Ally Financial (NYSE: ALLY), which disclosed audit fees of $14 million and non-audit fees of $6 million for fiscal 2013. Ally raised $2.38 billion and was the largest IPO of the period. Ally, incidentally, used to be a subsidiary of GM, which is also audited by Deloitte.
Only one of the 17 companies audited by KPMG disclosed audit fees related to fiscal 2013, for a total just over $300K.
This provides only a very rough idea of the audit fees related to the IPO companies, since as noted above, only a relatively small number of these companies have disclosed audit fees related to 2013.
Emerging Growth Companies
There’s one more thing to note about 2014 IPO activity as we look back on the first half of the year. 144 of the 166 companies to complete an IPO this year designated as Emerging Growth Companies. At 87% of all IPOs, this provides compelling evidence in favor of the somewhat controversial JOBS Act provision.
For more information on IPOs, this post discusses Emerging Growth Companies, this one discusses EGCs and IPO-related accounting and legal fees, and this one looks at accounting and legal fees for IPOs in 2013.