The recent drop in global stock markets will put significant pressure on companies pursuing or looking to complete aninitial public offering (IPO)in the second half of 2011, according toPwC US. With 79 completed IPOs generating$24.3 billionin proceeds throughJune 30th– more than double the amount raised for the first half of 2010 when there were 70 IPOs that generated$9.4 billion– the 2011 U.S. IPO market promised to be the most active year since 2007. However, according to PwC, increasing uncertainty around the global economic outlook may impact investor appetite for IPOs in the short term, hindering continued momentum in the U.S. IPO market. In the second week of August, there were 12 IPOs scheduled to price, with six companies postponing their offerings as of Wednesday morning.

"At the close of the second quarter, we were optimistic that the proceeds from IPOs completed in the second half of the year would lead 2011 to eclipse the full year 2010 proceeds of$39 billion; however, disruptions in the overall market and a variety of recent macroeconomic events may present considerable challenges for companies looking to execute an IPO in the coming months," saidHenri Leveque, Leader of PwC's Capital Markets and Accounting Advisory Practice. "The summer months, particularly August, are typically a slower time for IPO activity, so it will remain to be seen how quickly market stability and confidence returns and whether those companies waiting in the wings will move forward with their IPO plans come September."

The S&P 500 Volatility Index (VIX Index), which tracks volatility of S&P 500 index options and is a key indicator for investors' appetite for IPOs, jumped to over 47 on Tuesday, indicating increased caution for potential IPO investors. With the exception of a spike in March, the VIX Index had been on steady decline for over a year and was approaching 15, which is considered to be a favorable range for pricing IPOs. The lowest volatility in recent years was at the end of 2006 when the VIX Index approached 10, coinciding with a high point for historical IPO activity. According to PwC, the current jump may be cause for immediate concern; however, it doesn't come close to theOctober 2008high of 89, when IPO activity was at an all-time low. According to PwC, if the VIX Index declines during the remainder of August through to early September, IPO activity may recapture its prior buoyant levels of activity for the balance of 2011.

Despite lingering uncertainty regarding the economic outlook, PwC notes that short-term market events typically should not impact the process companies undertake to prepare for an IPO. "Companies that successfully execute an IPO in the coming months will have taken a long-term approach and undergone careful planning, thereby helping them to be ready to successfully navigate unforeseen market events," concluded Leveque. "Potential issuers often underestimate the time and effort that goes into embarking on life as a public entity. No one can predict when the window will open or shut; however, companies that are well-prepared will have the flexibility needed to take advantage of market conditions and be able to access the IPO market when the timing is right."

According to PwC, IPOs are considered to be one of the higher risk options for investments, due to a limited historical track record for some companies. "The underlying business of a potential issuer becomes more important in a difficult funding environment. Those issuers with businesses that are somewhat immune to economic downturns are more likely to be able to go to market than issuers that are heavily dependent on the consumer or general economic strength," said PwC's Leveque. "We expect to see solid companies with good business fundamentals succeed despite market volatility through IPOs and other viable avenues for investment, including the private placement market, which provides another avenue to bring cash from the sidelines into the U.S. economy for jobs, research and development, investment in capital equipment, and the creation of more goods for sale and purchase by consumers or businesses."