NEW YORK (Reuters) - The U.S. market for initial public offerings, now in a major slump, could start making a comeback in coming months as investors look to put cash to work, a senior Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) banker told the Reuters Summit on Monday.
In addition, a number of private equity firms are looking to monetize their investments by bringing them public and could likely offer them at significant discounts to valuations that might have been set last year, said Mark Epley, who is head of the bank's financial sponsors unit.
"I don't see any reason why well priced issues won't come back in size," Epley said at the Reuters 2008 Hedge Funds and Private Equity Summit. "There is a lot of cash waiting to buy equity."
Hobbled by market volatility, the value of U.S.-listed IPOs fell to $4.58 billion in the 2008 first quarter from $12 billion in the quarter a year ago, excluding the $19.6 billion offering of Visa Inc (V.N: Quote, Profile, Research, Stock Buzz) this year, according to Dealogic.
In this year's first quarter, there were 25 IPOs, including 12 special purpose acquisition vehicles, or SPACs, which are designed to go public, compared to 67 in last year's first quarter, Dealogic said.
Epley, whose clients include Blackstone Group (BX.N: Quote, Profile, Research, Stock Buzz), Apollo Management and Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) in private equity deals, said he expects the IPO market to open slowly with mid-sized deals. If they trade well post-IPO, other larger deals will follow.
"The window for IPOs opens and closes and it is closed right now," he said. "You will probably see some middle sized deals and trade decently and then you'll probably see more size creep up."
Faced with market volatility since last summer, many institutional investors have cashed out of the stock and bond markets, giving making them cash rich. But that cash could find a home in well-priced IPOs, particularly for portfolio companies of leveraged buyout firms like Blackstone, said Epley.
Even though these companies tend to be highly leveraged, they may have strong cash flows that would make them attractive to public markets, such as some industrial companies now held by buyout firms, he said. In addition, strategic buyers have pulled back from dealmaking activity, making the incentives to go public even stronger. Continued...
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