Despite a slower third quarter for the US IPO pipeline compared with IPO volume earlier in the year, the US exchanges saw significantly more action than their global counterparts. According to EY's US IPO Pipeline Analysis,62 IPOs have gone effective in Q3, raising approximately $41.7 billion in proceeds. Driven by a strong first half of the year and the largest IPO in history, Alibaba, the number of IPOs and proceeds raised on US exchanges for the first nine months of 2014 is 42% and 116% higher than the same period in 2013, respectively. 

"We're seeing heightened cross border activity, including the Alibaba mega IPO raising $25 billion," said Jackie Kelley, EY Global IPO Leader.  "The US is an attractive place to list if you're a technology or healthcare company as it offers credibility along with investor confidence. It also offers flexibility in capital structure and financial requirements."

Furthermore, familiarity with the US accounting regulations, the consistency of the capital markets and access to capital helped set a record a quarter for cross border IPOs, which were more than double through Q3 this year compared to the first nine months in 2013. This was led by issuers from China, Israel and the United Kingdom.

"The pattern of cross border IPOs has changed since the turn of the millennium. During the early 2000's there was almost a gold rush on junior markets, with companies often seeking quick money and reduced regulated requirements," said Kelley. "While junior markets still play a key role, most cross border listings are now done for strategic reasons and many are done by bigger companies. In turn, US major exchanges have attracted a larger proportion of global cross border listings since the start of 2010."

European and Asian instability in recent years has also played a role in driving listings to the US. Even as those markets have stabilized, it is still having an effect on current listings.

The Q3 Review:

The momentum has continued for healthcare and technology, with both rising to the top as the most active industries. More than half of all US IPOs in Q3 occurred in the healthcare sector, compared to a third in Q3 2013. Moreover, healthcare IPOs doubled in the first nine months of Q3 compared to the same time period in 2013, driven by smaller IPOs. Average proceeds were roughly $80 million, substantially lower than $210 million in 2013.

With the $25 billion Alibaba IPO, technology is the top sector by proceeds in 2014 despite a slower quarter for technology IPOs in Q3.  Unlike the previous quarters, foreign issuers accounted for more than 70% (5 of 7) of the technology IPOs.  Historically, technology companies have had strong valuations in US listings.  This precedent – the ability to place the value on a company's potential, not just where a company lies today – makes the US an attractive place to list for emerging foreign technology companies.  Besides seeing the long-term value, US investors and analysts also understand the intricacies of these companies, and price these companies accordingly.

Aside from Alibaba, proceeds raised by technology firms in Q3 ranged from $50 million to $1 billion. Post IPO market cap was between$200 million and $5 billion. Looking at Q3 as a whole in 2014, the US exchanges saw $41.7 billion in activity in 62 deals, compared to$12.28 billion in Q3 2013 in 60 deals.

A further breakdown of the 127 IPOs currently in the pipeline by sector shows that:

• 37 are in Health Care, raising $2.6 billion
• 14 are in Financial Services, raising $1.5 billion
• 10 are in Oil & Gas, raising $2.9 billion
• 9 are in Technology, raising $985 million 
• 8 are in Real Estate, raising $2.8 billion
• 8 are in Retails & Wholesale, raising $1.4 billion

VC and PE-Backed IPOs

Sponsor-backed IPOs for the first nine months of 2014 accounted for 62% of the number of US IPOs and 76% of the proceeds.

To date, the number of PE-backed IPOs increased slightly compared to the same period a year ago. Excluding Alibaba, average proceeds for PE-back IPOs is 38% higher in 2014, increasing to $400 million from $290 million in 2013.

VC-backed IPOs to date increased about 47% for the first nine months of 2014, compared to the same period a year ago. Average proceeds for VC-backed IPOs in 2014 increased slightly to $116 million from $104 million in 2013.

"Activity around VC-backed IPOs slowed in the US during the third quarter. However, we continue to see strong interest in the US, especially in the Life Sciences and Technology markets," said Jeff Grabow, Venture Capital Leader for Ernst & Young LLP.  "A major factor contributing to this is the large amount of overhang we have in VC backed companies.  With the internet bubble bursting and the financial crisis it impacted the ability of VC backed companies to get public."

Year-over-year pipeline comparison chart:

*Q3 2014 figures are as of September 24, 2014. Number of IPOs that went public is projection for the quarter

"At this point, we have a very positive outlook on the remainder of this year, and expect 2014 to surpass 2013 in both number of IPOs and volume," concluded Kelley. "Following Alibaba, investors will still look to IPOs for strong returns and there are countless companies still in line to go public before the end of the year that can make an impact in the market."