Through June, 333 companies went public, down from 702 a year earlier, according to data compiled by Bloomberg. The US$73.2 billion raised was 41 percent less than during the first half of last year and the least since 2005. For the first time since 1978, U.S. venture capital funds failed to take a company public last quarter.

Investors are leery of betting on newly public companies because the global credit crunch is weighing on consumer confidence. IPOs are one of Wall Street’s most profitable businesses, and the slowdown has cut underwriting fees by almost 50 percent to US$2.42 billion, Bloomberg data show. Average fees for the first half of 2008 were 3.3 percent of the money raised, compared with merger advisory rates of as much as 1 percent.

“People have become less interested in risk, and when it comes to the IPO market you’re typically talking about smaller companies that people know less about,” said Alex Vallecillo, a fund manager at Cleveland-based Allegiant Asset Management Co., which has US$28 billion in assets. “The issues hurting the market are not going to change overnight, so to expect a dramatic rebound in sentiment is pretty optimistic.” The world’s biggest financial companies have booked almost US$400 billion in writedowns and losses amid the worst U.S. housing slump since the Great Depression. Consumer confidence across Europe and Japan has tumbled to its lowest since 2003, and reached a 16-year nadir in the U.S.

IPO postponement

At least 166 companies have withdrawn or postponed their initial offerings this year, more than double the number in the first half of 2007, according to Bloomberg data. About a third of those were U.S. companies, including Forum Oilfield Technologies Inc., a maker of oil drilling equipment based in Houston, and Liberty Lane Acquisition Corp., the first so-called blank check firm underwritten by Goldman Sachs Group Inc., the biggest U.S. securities firm. The Standard & Poor’s 500 Index has lost 13 percent this year, while the broader MSCI World Index has declined 12 percent for its worst start to a year since 1982. The losses are steeper for new issues in Europe, where a Bloomberg benchmark tracking IPOs has declined 21 percent this year.

The U.S. IPO index has lost 9.9 percent. Offerings from companies backed by venture capital funds have dried up. An average of about 18 firms funded by U.S. venture investors went public in each quarter of 2006 and 2007, according to Arlington, Virginia-based National Venture Capital Association, which has tracked IPO data since 1970. Five such companies completed IPOs in the first three months of this year; none pulled it off last quarter.

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