Despite a marked moderation in mid-quarter IPO activity, the continued strength in the equities markets, a healthy registration pipeline, a decrease in market volatility and the second largest U.S. IPO of 2012 are all expected to support increased IPO momentum into the fourth quarter, according to IPO Watch, a quarterly and annual survey of IPOs listed on U.S. stock exchanges by PwC US. The quarter finished strongly with eight IPOs pricing in the last two weeks of September, including the quarter's largest IPO of Banco Santander's Mexican unit dual listing $4 billion IPO on September 25, which raised $2.9 billion in the U.S. markets. 

There were 29 U.S. IPOs in the third quarter of 2012, compared to 31 IPOs in the second quarter of 2012, and 21 IPOs in the third quarter of 2011. Total proceeds raised in the third quarter were $6.6 billion, compared to $21.8 billion in the second quarter of 2012 (which included the $16 billion Facebook IPO), and $3.2 billion in the third quarter of 2011. During the third quarter of 2012, the financial and the technology sectors, which had eight IPOs each, were the leading sectors with 58 percent and 13 percent of the proceeds, respectively. Financial sponsors continued their history of strong presence in the IPO market, backing 69 percent of IPOs in the third quarter of 2012, generating 43 percent of total proceeds.  

Click here to view: Value and volume of Financial Sponsor-backed U.S. IPOs

On a year-to-date basis, 104 companies have completed their IPOs, raising total proceeds of $34.1 billion, compared with 106 companies that had completed their IPOs in the first three quarters of 2011 raising $29.1 billion.

"The IPO market continued to demonstrate discrete periods of activity in the third quarter, reflecting the continued compression of IPO windows of opportunity," said Henri Leveque, leader of PwC's U.S. Capital Marketsand Accounting Advisory Services.  "The markets started well in July, became fairly muted in August, and showed a substantial pickup in activity in September to close out the quarter. As volatility decreased and the equity markets climbed to levels not seen since 2007, we've seen well-prepared companies able to execute on their IPO plans."

Click here to view: Value and volume of IPOs by quarter

Click here to view: Q3 comparison: Value and volume of IPOs

IPOs continued to outperform as a sector in the third quarter, with stock price gains handily exceeding the broader equity markets returns. On a quarter-to-date basis, all 29 IPOs are, on average, 26 percent above their issue price, again strongly outperforming the S&P500 which showed a third quarter gain of approximately 5.8 percent. Also, all 29 IPOs, when combined, increased their price by an average of 10 percent on their first day of trading and averaged a return of 13 percent after one week.

During the third quarter of 2012, 38 companies entered the SEC public IPO registration process, exceeding the 32 companies that filed in the second quarter of 2012. The LTM (last twelve months) SEC IPO pipeline had 95 companies seeking to raise $19 billion. The pipeline was led by the financial and energy sectors, followed closely by the technology and consumer sectors.  Combined, they accounted for 55 percent of the total proceeds being sought. According to PwC, the actual pipeline is likely to be higher due to the Confidential Filing provisions provided by the JOBS Act - Emerging Growth Companies (EGC's) are only required to publicly disclose their filings within 21 days of their anticipated IPO roadshow.

Click here to view: Value and volume of U.S. IPOs by industry

Looking at the global markets, Europe saw a strong end to the quarter, with the London Main Market IPO of Sberbank, the largest commercial bank in Russia, raising $5.2 billion through its offering of ordinary shares and global depository shares (GDSs). The outlook across Europe is promising, with traditional IPO indicators continuing to improve and a number of high-profile companies signalling their intention to float in the final quarter.

Meanwhile, in Asia, IPO activity is substantially down especially for Hong Kong which had been the number one market for IPOs three years in a row. Malaysia and Japan were more active with individual transactions going to market with competitive valuations or government support, including the Japan Airlines $8.5 billion IPO in September which was the second largest IPO of the year globally. Activity is expected to pick up somewhat mildly driven by liquidity.

PwC recently released a report titled "Considering an IPO? The Costs of Going and Being Public May Surprise You," detailing the traps, pitfalls and best practices in understanding and managing costs of an IPO and being a public company. According to the report, 48 percent of surveyed CFOs with firms that went public in the U.S. in the past several years said the one-time costs associated with their IPOs had exceeded their expectations. The report includes recommendations for preparing a detailed analysis of the costs, which will accelerate the budgeting process and make it more accurate, limit surprises throughout the IPO process and provide organizations adequate time to develop the infrastructure that will support the rigors and requirements of life as a public company.