Shares of action camcorder maker GoPro Inc. surged in their initial public offering Thursday, and no one was happier than the private equity firms that got to cash in on the deal.
This year’s IPO boom has helped to propel the stock market, boost economic confidence and beef up the returns of millions of 401(k) retirement accounts.
But perhaps more than anything, it’s been a boon for private equity and venture capital firms that have rushed to capitalize on the hot IPO market, especially for tech and tech-related companies.
Even before the 2008 global financial crisis, the subdued IPO market over much of the last decade limited the ability of investment firms to cash out their holdings.
With the new-issue market now surging at its fastest pace in more than a decade, professional investors are selling at a frenzied pace, in part because of uncertainty about how long the rally will last.
“We’re talking to companies every day that are lining up to get into that window while it’s still open,” said Doug Regnier, head of West Coast IPOs at Ernst & Young, the accounting and professional services firm.
Venture investments typically are made early in a private company to help it grow into a publicly traded company that allows investors to take their profits more easily in Wall Street trading.
There have been 162 IPOs so far this year, a 72% jump from the comparable period a year ago, according to the accounting firm.
The deals raised $35 billion, with selling by private equity and venture capital firms accounting for $28.5 billion, or 81% of the total, the firm said. By contrast, selling by investment funds accounted for 67% of the $62 billion raised altogether last year.
In many cases, private equity and venture capital firms sell relatively small stakes in IPOs and schedule secondary offerings months later to unload more when the price often is higher, said Francis Gaskins, research director for equities.com in Marina del Rey.
“The window is open now, but in the IPO market, things can change quickly,” Gaskins said.
In GoPro’s debut, investment firms Riverwood Capital, Foxteq Holdings and Sageview Capital Partners all sold small stakes.
It’ll be much the same Friday when arts-and-crafts retailer Michaels Cos. is expected to make its public debut. That will give Wall Street giants Blackstone Group and Bain Capital Partners a chance in the future to sell shares they’ve held since before the Great Recession.
Blackstone and Bain are not planning to sell shares in the IPO. However, the two firms received a $714-million dividend last year that was financed with debt. The IPO will go toward repaying the debt.
Barring an unexpected economic shock, the IPO market is expected to remain strong for most of this year, experts said, especially with the debut later this year of Alibaba Group Holding Ltd., which is expected to be the largest-ever U.S. IPO.
Alibaba is reportedly expected to sell a roughly 12% stake that could raise as much as $20 billion.
The Chinese Internet behemoth said Thursday that it would list its shares on the New York Stock Exchange, a huge coup for the Big Board. The shares will trade under the symbol BABA.
GoPro shot up more than 30% in its debut on the Nasdaq Stock Market. The shares, which trade under the symbol GPRO, gained $7.34 to $31.34.
The maker of hot-selling cameras and camcorders sold shares at $24, the high end of its expected range of $21 to $24. Thursday’s closing price put the market value of the company at nearly $4 billion.
GoPro cameras are popular among bikers, sky divers and mountain climbers, who strap them to their gear to film their live-action feats. The company dominates the market for so-called action cameras. Its founder came up with the idea for the company during a surfing trip.
Sales rose to $985.7 million last year, up from $64.5 million three years earlier. Earnings in that span jumped to $60.6 million from $11.6 million.
GoPro was helped by the fact that it is the first U.S. consumer electronics company to go public since headphone manufacturer Skullcandy Inc. debuted in 2011.
Investors are wagering, in part, that the economy will improve in the next few years, boosting consumer confidence and the willingness of shoppers to shell out for specialty cameras.