December 17, 2007

NEW YORK (Associated Press) - The U.S. market for initial public offerings enjoyed a strong year in 2007, even as the subprime mortgage and credit market crises unfolded, according to an annual review by IPO research firm Renaissance Capital.

As of Monday, the 2007 IPO market has seen the highest volume and largest proceeds since 2000, with 231 deals raising $53 billion.

The four largest issuers in 2007 were financial companies, but in a twist, financial offerings were among the biggest disappointments of the year. The largest deal, Blackstone Group LP’s $4.1 billion IPO, is currently trading more than 20 percent below its offering price of $31.

Instead, the IPO market’s performance was driven by Chinese companies and some blockbuster U.S. technology deals.

More than 50 technology IPOs launched in 2007, including VMware, a spin-off from EMC Corp., which was the largest tech IPO since Google. The offering raised more than $1 billion and gained 76 percent in its first day of trading. VMware is now the fourth most valuable software company in the world behind Microsoft Corp., Oracle Corp. and SAP AG.

China-based companies made up half of the 25 best-performing IPOs this year, including solar-cell maker JA Solar Holdings Co., the top-performing company of 2007. JA Solar shares have more than quadrupled since its IPO priced at $15 in February. In total, there were 34 Chinese IPOs in 2007, nearly four times as many in 2006.

Average total return for IPOs, however, did not match the average returns for 2003 to 2006. Analysts attributed the disruption to the dip in Asian stocks in the spring and then the fallout from the subprime crisis.

“During these downturns, investors were very quick to bail out of the portions of their portfolios in which they had the least experience and confidence - the recently acquired IPOs,” Renaissance Capital said in its report. “This may explain why the follow-on performance in the aftermarket was less than in previous years.”

Renaissance Capital noted that its Renaissance IPO Index, which was launched in September, is up more than 15 percent for the year and outperforming all other major indices.

For 2008, Renaissance Capital analysts predict that technology and energy companies will show strength. The analysts also forecast continued IPOs from China in advance of the Olympics.

The debuts of special-purpose acquisition companies are also expected to increase. Renaissance Capital said 18 SPACs debuted in 2007, while 32 are expected so far for 2008.

Renaissance Capital analysts noted that Visa Inc. and Kohlberg Kravis Roberts are the only high-profile financial companies currently in the IPO pipeline.

Associated Press