ACG Core Track: Capital Markets Update:From Leverage to IPO
Wednesday, March 23, 8:45 – 9:30 a.m.
Sponsored by William Blair & Company and BDO
From Leverage to IPOModerator: • Brett Paschke, William Blair & Company
Panel: • Duff Anderson, Solebury Capital Markets• Timothy R. Curry, Jones Day• Janis Koyanagi, Toronto Stock Exchange / TSX Venture
Exchange• Pam Buchanan, NASDAQ OMX
Sponsored by:
Equity Capital Markets Review
March 2011
Markets Have Recovered as Stability Returns
Money Market Assets Inflows to Equity Funds
Volatility Index LTM Equity Index Performance
Source: Equidesk, ICI Research and Fact Set.Data as of March 20, 2011.
($ in billions) (Index Value)
Equity Capital Markets Review
($ in trillions)
Apr 09
May
09
Jun 0
9
Jul 0
9
Aug 09
Sep 09
Oct 09
Nov 0
9
Dec 0
9
Jan 1
0
Feb 10
Mar
10
Apr 10
May
10
Jun 1
0
Jul 1
0
Aug 10
Sep 10
Oct 10
Nov 1
0
Dec 1
0
Jan 1
1
Feb 11
Mar
11
10
15
20
25
30
35
40
45
50
04/2010 06/2010 08/2010 10/2010 12/2010 02/201180
85
90
95
100
105
110
115
120
125
DJ Industrial Average (10.01%) NASDAQ Composite Index (10.55%)S&P 500 (9.72%) Russell 2000 (16.59%)
1
Earnings Have Driven Market Recovery…
LTM Yield Rates S&P 500 P/E Ratio
($ in billions)
S&P 500 – Top Line Results Weekly Inflows to Equity Funds
(Index Value)
Feb 10
Mar
10
Apr 1
0
May
10
Jun 1
0
Jul 1
0
Aug 1
0
Sep 1
0
Oct 10
Nov 1
0
Dec 1
0
Jan 1
1
Feb 11
Mar
11
0%0.5%
1%
1.5%2%
2.5%
3%3.5%
4%
4.5%
5%
160bps
180bps
200bps
220bps
240bps
260bps
280bps
300bps
10Y Treasury (3.3%)2Y Treasury (0.6%)2Y/10Y Treasury Spread (2.7%)
Source: Bloomberg, FactSet Research Systems, and Investment Company Institute (ICI) Data as of March 20, 2011.
29.5x
7.3x
16.4x15.3x
Equity Capital Markets Review
2
…Resulting in Increased IPO Activity
IPOs Filed Monthly IPO Backlog
IPOs Priced Annually IPOs Priced Monthly
Source: Equidesk.Data as of March 20, 2011. Data does not include REITs, Closed End Funds, and SPACs.
0
0
Equity Capital Markets Review
3
IPO Pricing Environment Has Improved
Source: Dealogic as of March 20, 2011. Does not include REITs or CLEFs.
Average One-Day Return
Offer Price Relative to Filing Range
10 10 11 8 11 9 16 20 19 6 15 (# of Deals) 3
Equity Capital Markets Review
4
Healthcare and Technology Lead the Way
IPOs Priced YTD by Primary Sector Current IPO Backlog by Primary Sector
Business Services
Consumer & Retail
Financial Services
Healthcare
Technology
Commercial & Industrial Business Services
Consumer & Retail
Financial Services
Healthcare
Technology
Commercial & Industrial
Source: Dealogic as of March 20, 2011. (1) Backlog defined as IPOs initially filed or revised within the past 180 days.
Equity Capital Markets Review
5
IPO Size and Structure Considerations
Average Secondary Component of IPOsPercentage of Company Sold
Total Offerings: 122 207 231 163 71 794
Total Offerings w/ Secondary Shares:
13(11%) 87(42%) 133(58%) 91(56%) 31(44%) 355(45%)
By offering size:
Source: EquiDesk. Excludes Closed End Funds and REITs. January 1, 2005 through December 31, 2010. Average percentage of secondary shares sold calculated as a percentage of total shares (primary and secondary) sold; secondary component percentage data only includes deals with secondary components.
0%-20%
40%-60% 20%-40%
60%-80%
80%-100%
<150M
150M – 300M300M – 750M
750M – 1.5B
1.5B – 5.0B>5.0B
<150M
150M – 300M
300M – 750M
750M – 1.5B
1.5B – 5.0B
>5.0B
Market Cap at OfferingImplied Market Cap at Initial Filing
Equity Capital Markets Review
6
Total Market Secondary LTMOffering Value Ownership Shares as a % LTM LTM EBIT
Percentile Size at Pricing Dilution of Offering Revenue EBIT Margin LTGR(1)
100% 18,140.1$ 49,500.0$ 100.0% 100.0% 131,037.0$ 4,205.0$ 98.7% 68.0%
95% 664.9$ 3,046.7$ 46.0% 95.8% 4,512.1$ 534.3$ 50.2% 46.0%
90% 356.9$ 1,556.9$ 34.9% 70.9% 1,924.3$ 265.5$ 41.3% 38.0%
80% 233.5$ 1,054.5$ 29.7% 34.5% 669.7$ 167.0$ 25.7% 30.0%
70% 159.1$ 687.3$ 26.1% 29.6% 419.1$ 69.5$ 19.0% 25.0%
60% 130.8$ 519.7$ 23.1% 19.4% 268.8$ 52.6$ 16.2% 23.5%
50% 102.6$ 397.6$ 21.1% 0.6% 188.0$ 32.3$ 12.7% 20.0%
40% 89.4$ 322.5$ 18.6% 0.0% 130.6$ 20.3$ 10.7% 18.7%
30% 75.2$ 239.1$ 16.9% 0.0% 89.9$ 14.7$ 8.5% 16.7%
20% 62.3$ 199.0$ 12.7% 0.0% 62.1$ 10.3$ 6.9% 15.0%
10% 42.0$ 129.7$ 6.6% 0.0% 32.1$ 6.9$ 3.7% 10.0%
5% 20.0$ 89.6$ 1.1% 0.0% 12.6$ 4.0$ 2.2% 9.8%
1% 8.4$ 40.0$ 0.0% 0.0% 1.7$ 1.5$ 1.1% 6.3%
IPO Company Characteristics
IPOs Priced LTM($ in millions)
Source: Dealogic, excludes REITs and closed-end funds. LTM as of 3-20-11.Note: Each category independently sorted by decile.(1) Mean EPS Estimate 60 days after pricing
Equity Capital Markets Review
7
Small Cap Companies Dominate U.S. Exchanges
Less than $1 billion market cap companies are a majority of companies on U.S. Exchanges:
75% of NASDAQ
40% of the NYSE
NASDAQ
As of March 3, 2011.Source: CapitalIQ
Equity Capital Markets Review
8
Overall Follow-On Market Overview
% Marketing Type % Shelf Takedown
Relative Offering Size as a % of Market Value Offering Size vs. Liquidity
Source: Dealogic and FactSet Research Systems as of March 20, 2011. All values are median for each respective period. Offer/3 and 6 Month performance for follow-ons priced less than their specified time periods are calculated from pricing to present.
Equity Capital Markets Review
9
Overall Follow-On Market Overview (cont’d)
Pricing Relative to Filing and Last Trade Performance Since Offering
Average Secondary Share % for FOs with Selling Shareholder Component by Deal Value (1)
Source: Dealogic as of March 20, 2011. All values are median for each respective period. Offer/3 and 6 Month performance for follow-ons priced less than their specified time periods are calculated from pricing to present.(1) Averages do not include FOs where secondary shares offered equals zero. Data reflects IPOs priced LTM as of above reference date.
# FOs w/ Secondary Shares 15 24 36 36 24 135
# of Total FOs 152 100 100 88 52 492
Equity Capital Markets Review
10
1414
7th
in MarketCapitalizatio
n
Canadian Markets… TSX & TSXV Global Leaders
8th
in EquityFinancing
*S&P is a trademark owned by Standard & Poor’s Financial Services LLCAs at December 31 2010
15
Global Exchange Leader for New Listings in 2010
TSX/TSXV LSE/AIMNYSE/AMEX
Euronext (US)Nasdaq ASX
Hong Kong Exchanges
Number of Issuers Listed
3,670 2,966 2,317 2,778 1,999 1,413
Quoted Market Value (US$ Billions)
2,277.53,613.1
13,394.1 3,889.4 1,454.5 2,711.3
New Listings 524 161 113 220 127 113
Equity Capital Raised (US$ Billions)
52.4 60.7 208.1 8.2* 53.8 109.5
Value Traded (US$ Billions)
1,383.6 2,741.3 17,795.6 12,659.2 1,062.6 1,496.4
Broad Stock Market Indexes (%Change over Dec. 31 2009)
14.5% 11.0% 10.8% 16.9% -0.7% 7.2%
*NASDAQ Information does not include secondary financingsSource: Exchange Websites, World Federation of Exchanges, (TMX analysis of public information)
16
27%32%
13%
28%
1%
16%12%
71%
39% 38%
11% 12%
3%
23%19%
55%
31%
56%
7% 5%
57%
35%
5%2%1%2%
13%
84%
<$50 Million $50 - $250 Million $250 - $500 Million >$500 Million
TSX - 1519 Issuers, $2.3T Mkt Cap TSXV - 2168 Issuers, $78B Mkt Cap NYSE - 2436 Issuers, $20.7T
NYSE Amex - 486 Issuers, $189B NASDAQ GS - 1508, $4.3T NASDAQ GM - 753, $170.5B
NASDAQ CM - 479, $44.4B
Listed Issuers Span the Spectrum
Market Capitalization Distribution of Listed Issuers
Source: Capital IQ, TSX and TSXV Market Intelligence Group
As at March 18 2011 for the US Exchanges and as at February 28 2011 for TSX and TSXV
17
94 9680
163153
145
187
158165
199 208
31
63
197
233
81
2003 2004 2005 2006 2007 2008 2009 2010
Canada USA
Average amount raised during IPO (2010)
U.S. markets: US $252.9 million
TSX: US $89.9 million
TSX Venture: US $6.6 million
Source: Hoovers IPO Central
Canadian equity marketplace is ideal for small to mid-cap IPOs
Total IPOs in Canada and U.S.
18
19.223.1
20.9
25.829.1 28.4
46.2
41.8
47.6
35.3
60.0
44.1
2.4 1.1 2.4 4.1
6.1 5.5 4.8
9.811.1
7.9
1.4
49.7 54.0
64.9
40.8
58.8
19.225.5 22.0
27.331.5 32.5
52.2
1999* 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Toronto Stock Exchange TSX Venture Exchange
Access to Capital
*TSX Venture Exchange commenced operations on November 29 1999
Toronto Stock Exchange and TSX Venture ExchangeTotal Financings (C$Billions) 1999 – 2010
19
TMX Group Serves Companies at all Stages of Growth
Market Capitalization Toronto Stock Exchange and TSX Venture
Exchange
Unique feeder system
491 graduates
+ 97 M&A*
*From January 1, 2000 – December 31, 2010
19
Toronto Stock Exchange issuer base: 1,516 issuers, ~$2.2 trillion market capTSX Venture Exchange issuer base (excludes NEX): 2,154 issuers, ~$71.5 billion market cap
As at December 31, 2010
31%40%
86%
12%2%
28%
<$50 Million $50 - $250 Million >$250 Million
% of TSX Issuers
% of TSXV Issuers
428
Issuers
612
Issuers
476
Issuers
1847
Issuers
25651
Issuers
20
International Companies Choose to List on TSX
and TSXV
Other, 16, 5%
Mexico & Central/ South
America, 19, 6%
South Africa/ Africa, 12,
4%
UK/ Europe, 26, 8%
Australia / NZ/ PNG, 38,
12%
USA, 154, 48%
China/ Asia, 53, 17%
Life Sciences, 14, 4%
Clean Technology, 23,
7%
Tech, 17, 5%
Financial Services & Products, 23,
7%
Oil & Gas, 31, 10%
Mining, 154, 49%
Diversified Industries, 56,
18%
Total International Listings as at December 31, 2010 = 318TSX = 176 listings, QMV=$180.5 BTSXV = 142 listings, QMV= $6.6 B
Total International Listings as at December 31, 2010 = 318TSX = 176 listings, QMV=$180.5 BTSXV = 142 listings, QMV= $6.6 B
TSX and TSXV International Listingsby Country/Region
TSX and TSXV International Listings by Sector
Other includes Bermuda, BVI, British West Indies, Cayman Islands, Channel Islands, Dubai, Guernsey, Israel, Trinidad
21
U.S. Based Companies by Numbers & Sector•
155US
Companies TSX (80) TSXV (75)
$95B
Market Cap
$3.0B
Raised Through
122 Financings
in 2010
21New US
Companies Listed in
2010
Life Sciences, 10, 6%
Oil & Gas, 16, 10%
Tech, 11, 7%
Clean Technology, 17,
11%
Financial Services & Products, 18,
12%
Mining, 61, 40%
Diversified Industries, 22,
14%
Total U.S. Listings as at February 28 2011 = 155
TSX = 80 listings, QMV=$92.4BTSXV = 75 listings, QMV= $2.8B
Total U.S. Listings as at February 28 2011 = 155
TSX = 80 listings, QMV=$92.4BTSXV = 75 listings, QMV= $2.8B
22
2008 - $255 M raised
2009 - $151 M raised
2010 - $223 M raised
2008 - $707 M raised
2009 - $1.8 B raised
2010 - $2.8 B raised
U.S. Based Listed Company Financings
$1,341.4
$1,707.1
$2,284.0
$1,943.6
$962.2
$1,967.3
$3,027.9
$3,568.5
68
102
64
12286
75
6168
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2003 2004 2005 2006 2007 2008 2009 2010
0
10
20
30
40
50
60
70
80
90
100
110
120
130
Amount Raised (C$ Millions) # of Deals
*Companies that are headquartered in the US
TSX Venture Exchange is a global benchmark of
excellence for junior public equities and along with Toronto Stock Exchange forms a first-rate tiered
system for the growth of emerging public companies.
23
International Investment Community Trades on Toronto Stock Exchange
25 International Brokers including:
• Barclays Capital• Citigroup• CSFB• Deutsche Bank• Goldman Sachs• HSBC• JP Morgan• Macquarie Capital Markets• Merrill Lynch• Morgan Stanley• Raymond James• Thomas Weisel• State Street• UBS
80 Canadian Brokers including:
• BMO Nesbitt Burns• Canaccord Genuity• CIBC World Markets• GMP Securities• RBC Capital Markets• Scotia Capital Markets• TD Securities• National Bank Financial
~40% of daily trading originates from International brokers
104.6
118.5
96.1
109.2
64.261.3
82.0
191.3 189.1
40.355.2
182.9
118.6
85.7
50.0
75.0
100.0
125.0
2004 2005 2006 2007 2008 2009 2010
0
50
100
150
200
Volume (B) Number of Transactions (M)
Volume CAGR 9%
Transactions CAGR 29%
Toronto Stock Exchange Volume and Transactions
(2004-2010)
24
performerscompanies with annual returns greater than 50%
2004 2005 2006 2007 2008 2009 2010
614 713 930 556 96 1,301 956
TSX & TSX Venture
24
Coming Up Next…• ACG Core Track (Elizabeth G)
• 10:00 – 11:00 a.m. The Sell Side Process: Tactics for a Changing Game
• 11:15 a.m. – Noon Lower Middle Market Update
• 2:00 – 3:00 p.m. Strategies for Add-On Acquisitions
• Noon – 1:45 p.m. Lunch & Keynote with General Stanley McChrystal (Ret)Sponsored by Fifth Street Capital (Elizabeth Ballroom)