Investing.com - A pipeline of high-potential deals provided by private equity firms promises a "strong performance" for initial public offerings (IPOs) on Wall Street next year, according to new research by Ernst & Young.
“There are a number of indicators that point to optimism in 2017. Private equity continues to provide a robust pipeline of strong deals," said Jackie Kelley, the IPO leader for E&Y Americas. "The backlog of tech companies is starting to make a debut. Unicorns are beginning to find a successful place in the public markets. This momentum, when matched with the stable, post-election markets, should lead to strong performance for IPOs in 2017.”
As this year winds down, it is turning out to be the slowest year for IPOs since the global financial crisis in 2008-2009.
As compared with 2015, deal volume this year decreased by 36% with 112 IPOs.
Capital raised was down 37% with U.S. $21.3 billion.
Financial sponsor-backed IPOs power the overall market, accounting for 56% of U.S. new listings and approximately 64% of proceeds in 2016.
Companies that debuted public markets this year have performed well, currently trading on average 17.6% above their premiere prices.
E&Y said the reaction to "geopolitical events" by the financial markets has been "far more positive" than many skeptics had predicted.
Many equity markets have risen to new highs, volatility has fallen and trailing price/earning ratios are on a rising trajectory.
The Dow this morning rose again, heading toward the 20,000.00 landmark, and was at 19972.14, up 38.33, or 0.19%, as of 11 a.m. Central.
The Nasdaq was up too, at 5501.08, and the S&P 500 was also gaining, at 2272.47.
President-elect Donald J. Trump and the Republican Congress have promised to reduce corporate tax rates from 35% down to 15% next year, and slash individual income taxes as well, increasing available capital for investment.
Though some dour analysts speculate the money from the tax cuts could be used simply to buy back stocks by the directors of currently publicly traded companies, others disagree.
Martin Steinbach, leader of E&Y Global and EMEIA IPOs, predicts that "a sharp rebound in new listings can be expected" in the U.S. in 2017.