September 13, 2013, 4:55 PM — Even before Twitter's initial public offering announcement grabbed the spotlight Thursday, the market for tech IPOs had been heating up thanks to a general rise in stocks.
There were 12 tech IPOs in the U.S. in the second quarter, twice as many as in the first quarter, according to the latest PwC Global Technology IPO Review, released Thursday. Second quarter IPOs were also up 50 percent year over year, in terms of the number of deals, PwC said.
"The increasing risk appetite of investors, followed by a rising equity market, led to a surge in IPO activity in Q2 2013," according to the report.
With the European economy stalling and an absence of IPOs in China, the U.S. led the world in tech IPOs in the second quarter, with two-thirds of the global total.
"With the US market showing greater strength than others around the world, it's not surprising that nine of the top ten deals traded on either the NYSE or NASDAQ," PwC said.
In terms of deal value, U.S. tech IPOs in the second quarter raised US$2.2 billion, a 139 percent increase from the first quarter but an 87 percent decline year over year, including the Facebook IPO of $16 billion in 2012, according to PcW. Taking the Facebook IPO out of the equation, IPO proceeds raised were up 59 percent year-over-year.
Other experts agree that a strong stock market was the key factor in the rise in the number of IPOs during the second quarter.
"To have a strong IPO market you need two things -- you have to have the general market at your back and your sector has to be performing better than others," said John Fitzgibbon, who runs the IPOScoop website.
Tech companies have at least one of those elements, a strong general market, obviously going for them. The Dow Jones Industrial Average is up 16.76 percent for the year, the Standard and Poor's 500 is up 18 percent for the year and the tech-heavy Nasdaq is up 23.07 percent of the year.
The Nasdaq Computer Index, which excludes telecom companies, is up 14.03 percent for the year -- not bad, but not as strong as other sectors. However, computer stocks have been gaining ground since the first quarter. At the end of the first quarter, the Nasdaq Computer index was up less the 6 percent for the year. So clearly, while computer stock may still have a way to go before catching up to some other sectors this year, they are gaining momentum.
Within the tech sector, software, Internet and services companies are the most likely IPO candidates, PwC noted. In the second quarter, software companies had six IPOs with total proceeds of $708 million, while Internet software and services companies recorded five IPOs that raised $606 million.
"Cloud-oriented tech is the in thing right now," agreed IPOScoop's Fitzgibbon.