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S.D. Logs 2 IPOs So Far, Anticipates More by Year’s End

The number and proceeds of initial public offerings globally this year look set to surpass 2016 after a robust first half of the year – and San Diego is following the trend, says Tim Holl, a partner in professional services firm EY’s local office.

Two locally-based companies have gone public this year, both in the life sciences: AnaptysBio Inc., a biotechnology company developing antibody therapeutics, in January, and Tocagen Inc., which is developing drugs to treat cancer, in April.

In the prior year, three San Diego companies went public. The three years prior, however, were heady times for the IPO market; in 2013, for example, seven local firms held initial public offerings.

“There’s clear strength in the markets right now from where we came in 2016,” Holl said. “We’re coming off of a low, but there’s momentum; we’ve got 55 deals in Q2 and 80 for the year in the U.S.”

That’s 86 percent more IPOs than in 2016 for proceeds of 230 percent more. The median deal size in the U.S. in the first half of the year was 55 percent higher than the median deal size last year, according to EY.

“As long as the market holds up, we should see a strong pipeline of companies that will be coming into the market here in the latter half of the year,” Holl said.

In the western U.S., 18 companies have held IPOs since the first of the year, according to an EY analysis of data from Dealogic as of June 17. Deals priced as of June 16 and expected by the end of June were included in the report.

In San Diego, “I think we’ll see some more in the second half of 2017. I don’t know that I can peg a number, but we’ll be better than 2016,” he said. “There are deals in the pipeline, so I’m cautiously optimistic.”

Based on the area’s strength when it comes to life sciences and broader interest in the industry – 25 percent of IPOs in the U.S. in the second quarter of 2017 were within health care – Holl said he expects to see local life sciences companies continue to find success in getting to public markets.

Perhaps other industries will get into the IPO game in the second half of the year, too.

“I love to see some technology companies (go public),” he said. The latest tech firm to go public in San Diego was AirGain in 2016. “Outside of that, there hasn’t been a lot of that.”

Alternative routes to raising capital – mergers and acquisitions and private equity purchases – are likely playing a role in the contracting number of public companies, Holl said.

“That’s always the give and take in this market: even where we’ve had good, successful companies that are primed for a public offering, when private equity or an acquisition comes in, we lose the opportunity on the public side,” he said.

Less than a month ago Chicago-based private equity firm GTCR announced it would acquire San Diego health tech company GreatCall, which employed 1,100 at the time of the announcement.

But while San Diego has a reputation for nurturing new companies that are later snapped up by out-of-town firms, the trend toward alternative methods of raising funds outside of the public markets isn’t just a local one, Holl added. The number of U.S.-listed companies is down below 6,000, a total last seen in the 1980s when the economy was much smaller.

That being said, barring unpredictable legislative and fiscal policy moves that affect the markets, companies that want to go public are in a good spot this year.

“Market conditions remain ideal for companies looking to list, and we expect they will in 2017,” said Jackie Kelley, EY Americas’ IPO markets leader, in the company’s second-quarter report on global IPO trends.

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