The market for U.S. initial public offerings began the year well, and it's picking up steam quickly, with June delivering the most number of public debuts in more than a decade. The year is poised to produce the highest IPO volume since the frothy dot-com era, which peaked in 2000. Middle-market companies are playing a huge role.

"The IPO market is red hot," says Neil Dhar, the U.S. leader of the capital markets practice group of PricewaterhouseCoopers. There were about 160 IPOs in the first half of 2014, compared to 238 in all of 2013 and 146 for 2012, he points out.

Dhar identifies three kinds of companies coming into the marketplace: spinoffs from big corporations, family-owned businesses that need capital and sponsor-backed middle-market companies. "Most of the IPOs coming out today are raising less than $200 million."

After coming off the most active first quarter since 2000, the second quarter beat that record with the highest number of IPOs priced in any quarter since the heyday of the tech bubble. With 83 IPOs priced in the second quarter, issuance was up 30 percent over the first quarter and 36 percent over the second quarter of 2013. The second quarter saw 117 companies file for IPOs, 19 percent more than last quarter and 54 percent more than the second quarter of 2013, according to Renaissance Capital, an IPO research and investment firm.

Companies in biotech, energy, financial and consumer goods sectors had good showings during the first half of the year and show promise going forward. Health care and technology companies remain the darlings of the IPO market today.

Eight of the 10 biggest venture capital exits in the April-through-June period came via an IPO, according to investment database research firm CB Insights. Most of the top deals came from the tech sector. Companies such as camera maker GoPro (Nasdaq: GPRO), data equipment maker Arista Networks (Nasdaq: ANET) and food delivery service GrubHub (Nasdaq: GRUB) were a few of the more successful tech IPOs to make their debut during the half.

Retail and consumer companies have done well too. IPO activity represented one of the strongest quarters the sector has seen in the last three years, in both volume and value with 13 offerings priced for total proceeds of $4.9 billion, according to PwC. This accounted for a significant increase comparatively and sequentially, with a 117 percent increase in volume over both Q2 2013 and Q1 2014, and a 136 percent and 217 percent increase in proceeds year-over-year and over Q1 2014, respectively. The retail and consumer sector is the third highest performer in Q2, in terms of volume, just behind technology and healthcare.

"Health care and technology have done well, but we have seen a good mix of consumer and retail companies go public as well. Overall, investors are enthusiastic about the asset class because of the higher yield it delivers. Debt instruments and other assets are yielding so low and investors are turning to the public markets for returns," says Dhar.

Larger companies still dominate IPO activity, but middle-market companies definitely have a starring role. The median IPO raised $100 million-indicating that middle-market companies are increasingly turning to the IPO market for liquidity.

In addition to the search for yield, other factors play a role in the resurging IPO market.

Many companies have come to grips with the costs of being public, especially as the cost of remaining private have risen, after years of being scared that the pressures of being a public company were too much for a small company.

"The cost of going public has eased a bit because of the JOBS Act (Jumpstart Our Business Startups), and the overall concern about cost associated with Sarbanes Oxley and other acts is behind us. People are sensitized to it now and the obstacle has been digested by the market," says Dom Esposito, partner and national practice and growth director with accounting firm CohnReznick.

Created in 2012, the JOBS Act was designed to encourage more IPO activity. The JOBS Act allows certain companies exemptions and deferrals for some of the disclosures and regulatory requirements and costs associated with an IPO. For example, the internal control audit requirements of Section 404 of the Sarbanes-Oxley Act can be eliminated for qualifying companies.

The second reason the IPO market is seeing a boost is that success breeds success. During the second quarter, IPOs gained an average of 9 percent in the first day of trading and 11 percent in the aftermarket, according to Renaissance Capital. When companies see other companies in similar sectors doing well, they start exploring their options, says Dhar.

While the middle market is finding its place on the public markets, the large market still dominates the headlines. The second quarter featured four of the five $1 billion -plus IPOs so far this year.

Additionally, private equity firms are responsible for many of the largest IPOs that made their debut during the first half. Twenty private equity backed companies went public in the second quarter, including nine that are returning to the public markets after being taken private by private equity firms over the past couple of years. The largest such deal was the IPO of TPG's IMS Health (NYSE: IMS), a Danbury, Connecticut-based vendor of U.S. physician prescribing data. The company raised $1.3 billion with its IPO in April. Other large IPOs that were backed by private equity firms included The Blackstone Group's (NYSE: BX) pricing of La Quinta Holdings Inc. (NYSE: LQ), an Irving, Texas-based mid-scale hotel chain; Clayton Dubilier & Rice's debut of Terminix's owner ServiceMaster Global Holdings (NYSE: SERV); and the craft store Michaels Companies (Nasdaq: MIK), which was owned by Bain Capital and Blackstone.

Some of the smaller mid-market IPOs that priced and are strong performers included drill bits manufacturer Superior Drilling Products (NYSE: SDPI), which priced in May raising $27 million, and Vital Therapies Inc. (Nasdaq: VTL), a healthcare company that raised $54 million in April. While these weren't the largest IPOs, they were two of the best performing IPOs of the second quarter, consistently trading well above their opening price. Zoe's Kitchen (Nasdaq: ZOES), the Mediterranean-style restaurant chain, was taken public in April by the middle-market, consumer-focused private equity firm Brentwood Associates. It was the best performing new public company of the second quarter. The IPO raised $276 million. Zoe's enjoyed a share increase of 64.8 percent on its first day of trading and had already returned 129.2 percent from its IPO in April, according to Renaissance Capital.

While there's no doubt the IPO market is healthier, the market is still far from where it was during the tech boom and there's plenty of ground to make up, Esposito points out. While the absolute number of IPOs in 2014 is higher than in recent years, it is still less than half of what supported the U.S. economy before the dot-com bubble, according to Esposito, citing a new report by CohnReznick. The report, "Perspectives on Middle-Market Equity Report," shows how the U.S. is falling far behind its IPO economic potential.

According to the report, it has been estimated that the U.S. should currently be issuing more than 900 IPOs a year based on the larger economy of today. For reference, 20 years ago, the U.S. issued 558 IPOs, double what is expected this year.

"If you apply a 3 percent growth rate based on the fact that that's the growth rate of the gross domestic product, we should really be issuing about 925 IPOs this year," says Esposito.

Additionally, the report finds that 80 percent of the new IPOs should be smaller IPOs, but that the market still isn't as open to smaller companies going public. The number of sub- $50 million IPOs decreased to 10 in the second quarter, representing only 13 percent of all corporate IPOs transacted for the quarter.

"The JOBS Act is helping and we are making progress, but we need to make it easier and cheaper for smaller companies to access the public markets," says Esposito.

The CohnReznick report also sheds light on changing investment banking practices. While going public used to be encouraged by investment bankers, that no longer seems to be the case. According to the report, the number of investment banks underwriting sub- $50 million IPOs has decreased by 84 percent from 20 years ago. In 2013 and 2014, only 27 investment banks participated in sub- $50 million IPOs. In 1993 and 1994, 166 investment banks participated in sub- $50 million IPOs.

"Smaller IPOs don't generate the revenues for the banks so they don't push their clients to the public markets anymore," says Esposito. "The reality is that the U.S. must do better, and has historically performed better, at encouraging IPO activity in order to better fuel economic and job growth."

While the U.S. IPO market may not be at the same levels it was in 1994 and 1995, the third and fourth quarters of 2014 are setting up to be robust, and the increase new issuances is expected to continue.

Companies seem increasingly eager to take advantage of the open IPO window. Notable companies that filed S-1 papers to go public include fast-food restaurant Bojangles' Restaurants and Datalogix, which provides online advertisers with offline transaction data. Popular Internet domain site GoDaddy also filed its S-1 and is hoping to raise $100 million.

"The public has its own house in order now, and if a company has a good growth story and financial record it will get attention on the public markets. Barring any major global disasters we can't control, the pipeline looks quite healthy right now," says Dhar.

The U.S. IPO markets were also very welcoming to Chinese companies. Ten Chinese companies raised $3.1 billion during the second quarter, the largest group of U.S. IPOs to come out of China since the fourth quarter of 2010. The comeback was mostly driven by tech offerings, with debuts from JD.com Inc. (Nasdaq: JD) and microblogging site Weibo (Nasdaq: WB). The 10 IPOs that priced gained 33 percentage on average, with packaged tour website Tuniu as the top performer, according to Renaissance Capital.

The best IPO, or at least the biggest, may be yet to come. In July, Alibaba Group Holding Ltd. filed an S-1 and many are expecting the IPO to be the largest technology IPO in history. Alibaba powers 80 percent of all online commerce in China, the world's second largest economy. According to the prospectus, the company intends to raise more than $15 billion and may top the $16 billion Facebook Inc. brought in during its IPO in 2012. The bulk of the proceeds raised by the Alibaba IPO will go to Yahoo Inc., which bought a 40 percent stake in Alibaba in 2005 for $1 billion. Alibaba is expected to make its public debut in September.

By 2020, online retail sales in China will reach between $420 billion and $650 billion, as much as the U.S., Japanese, U.K., German and French markets combined, according to McKinsey Global Institute.

Chinese companies are not just heating up the U.S. IPO market. Fifty-eight IPOs made their debut on China's Shanghai and Shenzhen stock markets during 2014. Additionally, all these stocks have seen increases of at least 44 percent on the first day of trading. The gains can be attributed to China's financial regulators, who shut down the IPO market for 14 months before reopening it at the start of this year, creating a wave of pent-up demand.

The market is expected to stay relatively busy throughout the end of the year. In July, the China Securities Regulatory Commission said it would allow an additional 12 companies to list. That is the third batch of such approvals since it reopened the IPO market in January. The government is expected to limit the number of IPOs from June to the end of the year to about 100, to prevent oversupply. However, there are more than 600 companies on the waiting list for approval for an IPO in China.

Many other countries are enjoying strong performances from their public markets. During the second quarter, public company proceeds were up 42 percent from the second quarter of 2013, according to Renaissance Capital. Europe led IPO issuance on the London Stock Exchange in the second quarter, raising the highest level of proceeds since the fourth quarter of 2007.

The pipeline in Europe is also expected to remain strong, with British mobile network Everything Everywhere filing to go public. The Bolsa de Madrid and the Borsa Italiana also experienced strong performances, raising $2 billion and $2.6 billion respectively.

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