SECs Advisory Committee on Small and Emerging Companies Panel - PowerPoint PPT Presentation

SEC’s Advisory Committee on Small and Emerging Companies – Panel Discussion Jeffrey M. Solomon, CEO Cowen and Company September 17, 2013 w ww w w w w ww w. w w . . .c c c co o o ow w w we en e e n n n. . . .c co c c o o om m m m

Cowen and Company SEC Advisory Committee on Small and Emerging Companies – Panel Discussion September 2013 Introduction Once Small Cap IPOs, Now Market Leaders Once Small Cap IPOs, Now Market Leaders Once Small Cap IPOs, Now Market Leaders Once Small Cap IPOs, Now Market Leaders • The United States has been the single greatest market for capital formation over the past century • Market and regulatory framework has enabled countless companies to fund growth by utilizing the equity capital markets • As a result, countless growth­oriented companies emerged as the global market leaders Note: Prices as of September 6, 2013. Inflation adjustment calculation based on July 2013 CPI. w w w ww w ww w w. w w . . .c c c co o ow o w we w en e e n n n. . . .c co c c o o om m m m 2

Cowen and Company SEC Advisory Committee on Small and Emerging Companies – Panel Discussion September 2013 Over the Past Decade, the IPO Engine that Fueled America’s Global Economic Dominance Has Slowed • Change in market structure for small capitalization companies • Increased listing requirements for public companies • Changes in research ecosystem ww w w w w w ww w w w. .c . . c c co o ow o w w we e e en n. n n . . .c c c co o o om m m m 3

Cowen and Company SEC Advisory Committee on Small and Emerging Companies – Panel Discussion September 2013 Significant Decline in Small IPOs on US Exchanges • Significant decline in total and small IPOs on US exchanges • New company price appreciation now going to private equity vs. public market investors (401k, pensions, etc.) • Negative impact on job growth (Number of U.S. IPOs) 700 IPOs raising More than $60 million IPOs raising Less than $60 million 600 500 400 300 200 100 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: ECM Analytics as of September 6, 2013. IPO data excludes REITs, closed­end funds, SPACs, LPs and transactions with <$5 million in proceeds w w ww w w w ww w w w. . . .c co c c ow o o w w we e e en n n n. .c . . c c co o o om m m m 4

Cowen and Company SEC Advisory Committee on Small and Emerging Companies – Panel Discussion September 2013 A Depressed IPO Market Contributes to Increased Unemployment • Small businesses are important job creators in our US Unemployment Rate vs. # of US IPOs US Unemployment Rate vs. # of US IPOs US Unemployment Rate vs. # of US IPOs US Unemployment Rate vs. # of US IPOs economy (Annual U.S. Unemployment Rate) (Number of U.S. IPOs) 10% 800 9 700 8 600 • Historically, US unemployment has risen during 7 500 6 periods coinciding with depressed IPO markets 5 400 4 300 3 200 2 100 • According to a 2011 report by IHS Global 1 0 0 Insight, 92% of a company’s job growth occurs after it goes public U.S. IPOs Annual U.S. Unemployment Rate Source: ECM Analytics, Grant Thornton and US Department of Labor. IPO data excludes REITs, closed­end funds, SPACs, LPs and transactions with <$5 million in proceeds. w w w ww w w ww w. w w .c . . c c co o ow o w w we e e en n. n n . . .c c c co o o om m m m 5

Cowen and Company SEC Advisory Committee on Small and Emerging Companies – Panel Discussion September 2013 Job Growth Post­IPO • According to a report by the Kauffman Foundation: 1 • From the June 1996 ­ December 2010, IPOs created 2.3 million jobs (+45% from pre­IPO employment levels) • Small company IPOs 2 created 1 million jobs (+156% from pre­ IPO employment levels) during the same period • Assuming IPO volume per year during the 1980­2000 period had been maintained during the 2001­2011 period, an estimated 1.9 million jobs would have been created 1 Kauffman Foundation, “Post­IPO Employment and Revenue Growth for U.S. IPOs, June 1996­2010,” May 2012 2 Kauffman Foundation’s definition of Emerging Growth Companies differs from that of the JOBS Act. To avoid confusion in this presentation, we refer to Kauffman’s definition of Emerging Growth Companies as “small company”. w w w ww ww w w w w w. . . .c co c c o ow o w w we en e e n n n. . . .c co c c o o om m m m 6

Cowen and Company SEC Advisory Committee on Small and Emerging Companies – Panel Discussion September 2013 JOBS Act – Positive Impact on Capital Formation • The number of sub­$250 million market capitalization companies that have gone public this year exceed the total for 2012 (39 vs. 34) 1 • With an estimated 234 companies in the IPO backlog (including confidential filers) 2 , this year could see the most active IPO calendar in recent years IPO Backlog I PO Backlog Including – – Including Confidential Filers Confidential Filers I I PO Backlog PO Backlog – – Including Including Confidential Filers Confidential Filers (Potential Proceeds, US$ in billions) (# of IPOs) 234 $36.0 250.0 225.0 $35.2 30.0 200.0 175.0 147 24.0 150.0 112 18.0 125.0 101 95 100.0 46 63 12.0 61 $23.3 $21.5 75.0 $16.0 50.0 6.0 $16.4 $11.7 $11.4 25.0 $0.0 0.0 0.0 (Year End) 2006 2007 2008 2009 2010 2011 2012 2013E 1 ECM Analytics. IPO data excludes REITs, closed­end funds, SPACs, LPs and transactions with <$5 million in proceeds. 2 Based on Renaissance Capital Private Company Watchlist as of September 6, 2013. w w w ww ww w w w w w. . . .c co c c o ow o w w we en e e n n n. . . .c co c c o o om m m m 7

Cowen and Company SEC Advisory Committee on Small and Emerging Companies – Panel Discussion September 2013 JOBS Act – Who is Benefitting? • Companies J JO OB BS S A Ac ct t a ac ch hi iev eved ed a a J J O O B B S S A A c c t t a a c c h h i i ev ev ed ed a a • Total $ raised for EGCs (all sectors): $16.1 billion b ba b b a al a l l lan an an anc ce c c e e e b b b be e e et t tw t ween w w een een een c ca c c a a ap p pi p i i it t tal t al al f al f f fo o o or rm r r m m mat at at ati i i io on o o n n a n a a an nd n n d d d i in i i n nv n v ves v est es es t t to or o o r p r r p p pr r r ro o ot o tec t t ect ec ec ti t t i i io o o on n n n • Total $ raised for EGCs (biotech): $2.5 billion • Biotech industry and their targeted patients, but it is still small relative to our needs • Helped to create a complementary source of financing to NIH funding • IPOs can open up additional funding for cancer research and orphan drug research – potential to grow exponentially • $2.5 billion raised by 31 EGC biotechs under the JOBS Act vs. $30.9 billion in NIH funding across 235 research/disease areas 1 Note: Dealogic, ECM Analytics. IPO stats refer to the period April 1, 2012­September 6, 2013. Figures include IPOs with proceeds above $10 million and exclude REITs, closed­end funds, unit offerings, BDCs and BCCs. 1 NIH, 2012 figures ww w w w w w ww w w w. .c . . c c co o ow o we w w e e en n n n. .c . . c c co o o om m m m 8

Cowen and Company SEC Advisory Committee on Small and Emerging Companies – Panel Discussion September 2013 JOBS Act – Who is Benefitting? (cont’d) C Cr ri it ti ic ci is sm ms s o of f t th he e C C r r i i t t i i c c i i s s m m s s o o f f t t h h e e • Individual and institutional investors J JO J J O O OB B B BS S S A S A Ac A ct c c t h t t h h ha a a av v v ve e e e b be b b e een e en en en un u u u nf n n fo f f o ou o un u u n nd n ded d d ed ed ed • Aftermarket performance: +64.4% average price appreciation for EGC IPOs vs. +26.2% for non­EGC IPOs 1 • Pensions are the largest investors in private equity 2 ; allocations have risen to an estimated 12.7% of total assets 3 • JOBS Act has enabled pensions to realize increased value in their private equity investments Note: Dealogic, ECM Analytics. IPO stats refer to the period April 1, 2012­September 6, 2013. Figures include IPOs with proceeds above $10 million and exclude REITs, closed­end funds, unit offerings, BDCs and BCCs. 1 Offer price to current price performance. 2 Private Equity Growth Capital Council, “The Interdependence of Pension Security and Private Equity,” April 8, 2013 3 Wall Street Journal, “Pensions Bet Big With Private Equity,” January 25, 2013 w w w ww ww w w w w. w . . .c c c co ow o o w w we e e en n n n. .c . . c c co o o om m m m 9