Current IPO Market Environment - IBF May 2005

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Current IPO Market Environment - IBF May 2005

  1. 1. Jefferies & Company, Inc. IPO Market Revival? June 2005 CONFIDENTIAL DRAFT
  2. 2. Quarterly Technology IPO Issuances - - 2 7 9 11 4 22 21 3 9 12 - 5 10 15 20 25 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Number of Deals $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 Amount Raised ($millions) Number of Deals Amount Raised Note: Technology defined per SDC Platinum high technology industry classification. 2
  3. 3. LTM Technology IPO Issuances by Subsector (1) Software 19% Internet 19% IT & Network Services 24% Semiconductors 9% Network Infrastructure 7% Computing Equipment 3% Other 19% Note: Technology defined per SDC Platinum high technology industry classification. (1) As of May 20, 2005. 3
  4. 4. LTM % Change – Price Offer to 1 Day (1) 16.0% 27.1% 15.0% 23.0% 6.1% -1.9% 8.9% 12.1% 22.8% 11.6% 9.3% 11.7% 27.5% 10.9% 16.1% 13.9% 28.6% 2.3% 34.5% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Median 14.4% Note: Technology defined per SDC Platinum high technology industry classification. (1) As of May 20, 2005. 4
  5. 5. LTM % Change – Price Offer to Current (1) Note: Technology defined per SDC Platinum high technology industry classification. (1) As of May 20, 2005. 16.5% 23.8% -25.7% -52.5% 0.3% 16.6% 125.1% 17.3% 29.6% 81.6% 18.6% -4.2% -2.8% -12.9% -14.5% -18.4% 2.6% 1.4% 3.0% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Median 2.6% 5
  6. 6. Size And Profitability Have Become Important Determinants for Technology IPOs ($Millions) Median LTM Revenue $44.8 $77.1 $64.0 $55.0 $85.0 $137.5 $104.2 $72.5 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Overall Average = $80.0 M Median LTM EBITDA Margin 20.1% 8.7% 28.2% 10.4% 16.5% 11.8% 37.3% 31.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Overall Average = 20.6% 7
  7. 7. Summary Of Median Performance For Technology IPOs Since Mid-2003 <ul><li>As of May 19, 2005. Source: Jefferies Broadview’s IPO Database / Hoover’s IPO Central / Capital IQ </li></ul>6 H2 2003 H1 2004 H2 2004 YTD 2005 (1) % Companies with Revenue < $25MM 11% 10% % Companies Unprofitable 16% 19% Median Quarters of Profitability 6 5 % Companies Trading Below IPO 37% 57% 34% 32% 3 51% 0% 20% 9 67% IPO Statistics (1) H2 2003 $85,000 $72,493 36.3% 6 4.5% 6.6% H1 2004 $86,000 $87,357 54.8% 5 7.6% (16.3%) Offering Amount TTM Revenue TTM Revenue Growth Quarters of Profitability EBIT Margin % Change From IPO (1) TTM H2 2004 $74,300 $47,447 60.3% 3 4.4% (7.3%) YTD 2005 $154,000 $85,044 43.0% 9 22.3% (10.3%) Period Median Profile (1) NASDAQ Performance During Period +22.1% +2.2% +7.9% (4.2%)
  8. 8. Technology Capital Markets Environment Today <ul><ul><li>Cautious outlook has impacted the equity markets </li></ul></ul><ul><ul><ul><li>Interest rate increases have caused equity mutual fund flows to decline to $6.0B per month in 2005YTD vs. $10.3B in 1H04 </li></ul></ul></ul><ul><ul><ul><li>S&P and NASDAQ indices down 4.2% and 9.3% since 1/1/05 </li></ul></ul></ul><ul><ul><ul><li>High-profile IPOs have failed to generate investor interest </li></ul></ul></ul><ul><ul><ul><ul><li>Boise Cascade withdrawn </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Lazard and Warner Music Group trading below offer price </li></ul></ul></ul></ul><ul><ul><ul><li>Public companies are increasingly going private to escape the regulatory burdens and poor returns of public listings (e.g. SunGard, Maytag) </li></ul></ul></ul><ul><ul><li>The Technology IPO market has contracted </li></ul></ul><ul><ul><ul><li>The number of quarterly IPO issuances has dropped 50% from Q4 ’04 to Q1 ’05 and continues to decline in Q2 ‘05 </li></ul></ul></ul><ul><ul><ul><li>Median offer price to current price percentage change for Technology IPOs is (3.5%) </li></ul></ul></ul><ul><ul><ul><li>Over 60% of 2005YTD IPOs are trading below their offer price </li></ul></ul></ul><ul><ul><ul><li>SSA Global recently cut the price of their IPO to $11 from an initial range of $13-$15 and cut the size of the IPO from 14.3 to 9.0 million shares, raising $99 million vs. the original filing size of $200 million </li></ul></ul></ul><ul><ul><ul><ul><li>SSA opened flat on its first day of trading </li></ul></ul></ul></ul><ul><ul><li>The IPO bar is high </li></ul></ul><ul><ul><ul><li>2005YTD IPOs have a median EBIT margin of 22.3% and 9 quarters of profitability at pricing </li></ul></ul></ul><ul><ul><ul><li>No enterprise software vendors have filed for an IPO since November 2004 </li></ul></ul></ul>1

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