In recent decades, the global IPO market proved to be remarkably resilient. IPO activity weathered the 1987 market crash, the Russian debt implosion, the credit crisis of Long Term Capital Management, the Internet bubble bursting and 9/11. However, this year's unprecedented financial crisis caused global IPO issuance to come to a near halt in mid-2008. The few stocks that managed to go public performed poorly and were pulled down further by the broader markets. The average new issue was down 35% by year-end (US performance was not much better, averaging -27%, the worst since the 1973 recession). Although these returns were in line with the broader indices, investors were discouraged by negative absolute returns and avoided further participation in IPOs. At the same time, companies that were not in dire need of financing postponed offerings instead of accepting the lower valuations demanded by potential buyers.

The overall drop in issuance was huge, with global proceeds falling 69% year-over-year, and the most established IPO markets, the US and Europe, were hit particularly hard. In the US, excluding Visa's record-breaking deal, IPO proceeds would have been the worst since 1994 as venture capital and private equity deals virtually disappeared and the market for SPACs dried up. While the successful debut and strong aftermarket performance of one US deal in November and stirrings in other markets toward the end of the year were positive signs for IPO activity, the global IPO market still has a long way to go to full recovery. (more)

Visa Inc. (V), the world’s largest provider of credit and debit cards, was named the "Renaissance Capital 2008 IPO of the Year" by the IPO research committee of Renaissance Capital. The selection was based on a study conducted by Renaissance Capital's analysts, who prepared investment research reports on the majority of companies that went public last year. Although IPO volume was low in 2008, Visa would have stood out from the pack in any year because of its globally recognized brand, dominant market position, long track record of growth and profitability, the record-breaking size of its IPO, and the relatively strong performance of the company's stock compared with global equity indices. more

With IPO volume low, many investors will be tempted to ignore the IPO market altogether as we move into 2009. This may be a mistake. Historical precedent suggests that IPOs in periods of low issuance can generate very strong returns as companies are forced to become more realistic with their proposed valuations in order to successfully raise capital, thereby creating opportunities for investors. (more)