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The IPO Crisis And What Must Be Done To
   Fix It: Market structure is too low cost to pay for the
   infrastructure needed to support capital formation.
   Improved strategies are needed. We offer some.
   SoHo Loft
   Reed Smith
   599 Lexington Avenue
   22nd Floor
   New York, NY
   January 22-23, 2012
   David Weild
   212.542.9979
   david.weild@cmapartners.com


© Capital Markets Advisory Partners, LLC
Our Focus
  • Change Agent (Supported by Grant Thornton)
          – Studies
                  •   Why are IPOs in the ICU?
                  •   A wake up call for America
                  •   Market structure is causing the IPO crisis – and more
                  •   Killing the stock market that laid the golden eggs (pending chapter in “Broken
                      Markets” to be published by John Wiley & Sons)
          – Citations
                  • Congress, Senate, SEC
                  • IPO Task Force Report to the US Treasury
                  • Jeffrey Immelt led Jobs Council Report to the White House

  • Solutions for Issuers (Capital Markets Advisory Partners)
          – How to significantly increase size and quality of institutional
            demand.
                  • Cut deal execution risk
                  • Improve price
                  • Improve aftermarket performance
© Capital Markets Advisory Partners, LLC
                                                        2
The small IPO market collapsed with the OHRs and
    Reg. ATS (loss of B/D incentives)
    As seen in the study "Market structure is causing the IPO crisis—and more"
    Percent of total U.S. IPOs
  100%
                                   Allegations of Spread Fixing (1994)
    90%                                    Manning Rule (1996)        Transactions raising at least $50 million
    80%                                                     OHRs (1997)
                                                              Regulation ATS (1998)
    70%

    60%                                                                                 Decimalization (2001)
    50%
                                                                                            Sarbanes-Oxley (2002)
    40%                                                                                                 Reg. NMS (2005)

    30%

    20%

    10%            Transactions raising less than $50 million

      0%
         1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
    Sources: Grant Thornton LLP, Capital Markets Advisory Partners and Dealogic                              YTD
    Data includes corporate IPOs as of 6/30/11, excluding funds, REITs, SPACs and LPs


© Capital Markets Advisory Partners, LLC
                                                                                        3
A catastrophic fall in the number of listed
                                 companies (43%)
                                 As seen in the study "A wake up call for America"*
                                                      200
                                                                                                                                                                  China
 Indexed value of selected global exchange listings




                                                      150

                                                                                                                                                                    Hong Kong

                                                      100

                                                                                                                                                                      Australia
                      (1997 = 0)




                                                        50
                                                                                                                                                                Germany

                                                                                                                                                                          Tokyo
                                                         0
                                                                                                                                                       London         Toronto


                                                       (50)
                                                                                                                                                                 United States


                                                      (100)
                                                              1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sources: Grant Thornton LLP, Capital Markets Advisory Partners, World Federation of Exchanges and individual stock exchanges                                      YTD
*March 16, 2011; House Financial Services Committee “Hearing on Legislative Proposals to Promote Job Growth, Capital Formation and Market Certainty”
statement by David Weild
© Capital Markets Advisory Partners, LLC
                                                                                                                   4
Current legislation will help but won’t do
    nearly enough to fix our stock markets.
                                      Private   Disclosure
                                       Public   Standards
                                                         • H.R. 1070 (Reg. A)
                                                         • H.R. 2930 (crowdfunding)




                Private                                                     Private
                 Public                                                     Public
    •   H.R. 1070 (Reg. A)
    •   H.R. 1965 (banks; 500-2,000 shareholders)
    •   H.R. 2940 (general solicitation, Reg. D)
    •   H.R. 2930 (crowdfunding)
    •   H.R. 2167 (500-1,000 shareholders)
© Capital Markets Advisory Partners, LLC
IPO success rates have been in sustained
    decline for nearly two decades, despite deals
    that are increasing in average size and maturity

                                                                              Success rate of trailing 30 IPO filings




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.

© Capital Markets Advisory Partners, LLC
                                                                              6
Unprecedented volatility (S&P 500)
    Standard & Poor's 500 index moves of 4% or higher


                  Intraday price volatility                                                                Closing price volatility
     4%                                                                                    4%



     3%                                                                                    3%



     2%                                                                                    2%

                             Excluding 2008
                                  and 2009
     1%                                                                                    1%



     0%                                                                                    0%
             1960s 1970s 1980s 1990s 2000s 2010s*                                                   1960s 1970s 1980s 1990s 2000s 2010s*

    *Analysis through 9/30/11
    Source: Grant Thornton LLP, Capital Markets Advisory Partners and Capital IQ
    Original analysis from "Market Swings are Becoming New Standard," New York Times, September 11, 2011

© Capital Markets Advisory Partners, LLC
                                                                                       7
IPOs take > 3 times as long to get through the
    SEC than they did 20 years ago

                Number of days in registration
                 (Trailing 30-deal average)




© Capital Markets Advisory Partners, LLC
                                                 8
We would have enjoyed a venture-backed post
                                                            1990s 'IPO Echo Boom,' but Reg. ATS killed it
                                            $120
U.S. Venture Capital Raised (In Billions)




                                                                                                                                                                                               Source: National Venture Capital Association
                                                                                                                                                                                               Data as of 6/30/11
                                            $100


                                                      $80


                                                      $60


                                                      $40


                                                      $20


                                                      $0
                                                            1991    1992    1993    1994    1995    1996    1997    1998    1999    2000    2001     2002       2003     2004     2005     2006       2007      2008     2009      2010       2011
                                                                                                                                                                                                                                              YTD
                                                                     "Penny Stocks"                   Deal Size < $50 Milllion                     Deal Size ≥ $50 Million                               U.S. Unemployment Rate
                                                      12%                                                                                                                                                                                               900
                                                                                                                                               Sources: Grant Thornton LLP, Capital Markets Advisory Partners, Dealogic and U.S. Department of Labor
                                                                                                                                               Data includes corporate IPOs as of 6/30/11, excluding funds, REITs, SPACs and LPs                        800
                                                      10%
                             U.S. Unemployment Rate




                                                                                                                                                                                                                                                        700




                                                                                                                                                                                                                                                              Number of U.S. IPOs
                                                       8%                                                                                                                                                                                               600
                                                                                                                                                                                                                                                        500
                                                       6%
                                                                                                                                                                                                                                                        400
                                                       4%                                                                                                                                                                                               300
                                                                                                                                                                                                                                                        200
                                                       2%
                                                                                                                                                                                                                                                        100
                                                       0%                                                                                                                                                                                               0
                                                             1991    1992    1993    1994    1995    1996    1997    1998    1999    2000     2001       2002     2003     2004     2005       2006      2007      2008      2009      2010      2011
                                                                                                                                                                                                                                                 YTD

                                               © Capital Markets Advisory Partners, LLC
                                                                                                                                                     9
We believe the loss of small IPOs is a major
                      contributor to job loss in the United States
                      As seen in the study "Market structure is causing the IPO crisis—
                      and more"
                                     "Penny Stocks"       Deal Size < $50 Milllion         Deal Size ≥ $50 Million   U.S. Unemployment Rate
                           12%                                                                                                                900


                                                                                                                                              800
                           10%
                                                                                                                                              700
  U.S. Unemployment Rate




                           8%                                                                                                                 600




                                                                                                                                                    Number of U.S. IPOs
                                                                                                                                              500
                           6%
                                                                                                                                              400


                           4%                                                                                                                 300


                                                                                                                                              200
                           2%
                                                                                                                                              100


                           0%                                                                                                                 0
                                 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
                                                                                                                                     YTD
 Sources: Grant Thornton LLP, Capital Markets Advisory Partners, Dealogic and U.S. Department of Labor
 Data includes corporate IPOs as of 6/30/11, excluding funds, REITs, SPACs and LPs
© Capital Markets Advisory Partners, LLC
                                                                                         10
We should be approaching 1,000 IPOs/year
                          and < 5% unemployment
                                                               U.S. IPOs (Actual)                                           U.S. IPOs (Projected)
                                                               U.S. Unemployment Rate (Actual)                              U.S. Unemployment Rate (Projected)
                         12%                                                                                                                                     1,000


                                                                                                                                                                 900

                         10%
                                                                                                                                                                 800


                                                                                                                                                                 700
                         8%
U.S. Unemployment Rate




                                                                                                                                                                         Number of U.S. IPOs
                                                                                                                                                                 600


                         6%                                                                                                                                      500


                                                                                                                                                                 400

                         4%
                                                                                                                                                                 300


                                                                                                                                                                 200
                         2%

                                                                                                                                                                 100


                         0%                                                                                                                                      -
                               1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
                                                                                                                                    Est. Est. Est.
                          The 'U.S. IPOs (Projected)' estimate assumes 520 IPOs per year starting in 1991 with a 3% compound annual growth rate equivalent to
                          the U.S. GDP growth rate. A simple linear regression model was created using historical data to predict the 'U.S. Unemployment Rate
                          (Projected)' based on this number of projected IPOs.
                          Sources: Grant Thornton LLP, Capital Markets Advisory Partners, Dealogic and U.S. Department of Labor
                          Data includes corporate IPOs as of 6/30/11, excluding funds, REITs, SPACs and LPs
          © Capital Markets Advisory Partners, LLC
                                                                                                               11
IPOs > $500 million have demonstrated the
    steepest decline of all

                                                                               Success rate of trailing 30 IPO filings
                                                                               with proceeds of at least $500 million




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.

© Capital Markets Advisory Partners, LLC
                                                                              12
Loss of the Ecosystem: Underwriting Groups
           Microsoft’s IPO (1986) vs. LinkedIn’s IPO (2011)




© Capital Markets Advisory Partners, LLC
                                           13
Microsoft IPO: $58,695,000 March 13, 1986
    Underwriter Table from Final Prospectus 116 Underwriters (p. 1 of 3)




    Source: Microsoft IPO Final Prospectus, Capital Markets Advisory Partners, LLC.
© Capital Markets Advisory Partners, LLC
                                                                                      14
Microsoft IPO: $58,695,000 March 13, 1986
    Underwriter Table from Final Prospectus 116 underwriters (p. 2 of 3)




    Source: Microsoft IPO Final Prospectus, Capital Markets Advisory Partners, LLC.
© Capital Markets Advisory Partners, LLC
                                                                                      15
Microsoft IPO: $58,695,000 March 13, 1986
    Underwriter Table from Final Prospectus 116 underwriters (p. 3 of 3)




    Source: Microsoft IPO Final Prospectus, Capital Markets Advisory Partners, LLC.
© Capital Markets Advisory Partners, LLC
                                                                                      16
LinkedIn IPO: $352,800,000 May 18, 2011
    Underwriter Table from Final Prospectus 5 underwriters




    Source: LinkedIn IPO Final Prospectus
© Capital Markets Advisory Partners, LLC
                                            17
Two Solutions (Both address the economic
      model)
  •     Issuer’s Choice - Board Chooses “Tick Size” - Issuers deserve choice in
        how the market in their shares is made and supported (“Mass Customization”)
          – Issuer Boards of Directors should be allowed to determine „tick size‟ which would cost
            little to implement and provide an important tool to impact support (research, sales
            and capital) and modulate speculative trading and volatility.
  •     Alternative Sub $2 Billion Market Cap Stock Market - Issuers (and
        Americans) deserve a sub-$2 billion market cap stock market structured to
        create focus on capital formation and job creation (see Wall Street Journal Op-
        ed dated October 28, 2011, entitled “How to Revive Small-Cap IPOs”)




© Capital Markets Advisory Partners, LLC
                                                  18
Capital Markets Advisory Partners:
                                           Solutions for Issuers




© Capital Markets Advisory Partners, LLC
                                                     19
The best investors are now self-directed. We
    work with management to reach them.
   Wall Street Adjusted                     We help Issuers Adjust
   (Each change increased selling)          (Each step increases placement)
   • Focused on big, large cap              • Methods to reach the self-
     funds                                    directed 2/3rds of the
   • Focused on big, high                     institutional market
     turnover funds                         • Methods to minimize
   • Shut down middle-market                  selling pressure
     institutional sales forces             • Methods to promote retail
   • Converted retail from stock              ownership
     broking to asset gathering             • Campaign to improve the
                                              stock markets for issuers


© Capital Markets Advisory Partners, LLC
                                           20
Wall Street Not Reaching Best Investors
                Distribution of fundamentally oriented U.S. institutions in 2010
                Each tier = 100* institutions ranked by equity assets (e.g., 1st tier = top 100 institutions)
                                                                     Market Value ≤ $2 billion                         Market Value > $2 billion
                $8,000,000,000,000




                $7,000,000,000,000


                                                                                                          2010
                $6,000,000,000,000




                $5,000,000,000,000
Equity Assets




                $4,000,000,000,000




                $3,000,000,000,000




                $2,000,000,000,000




                $1,000,000,000,000




                                $0
                                     Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier
                                      1    2    3    4    5    6    7    8    9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36


    *36th tier = 43 institutions
    © Capital Markets Advisory Partners, LLC
                                                                                                               21
Market Value of Shares Held




                                                                                                                                                        $1,000,000,000
                                                                                                                                                                         $1,200,000,000




                                                                                            $200,000,000
                                                                                                           $400,000,000
                                                                                                                          $600,000,000
                                                                                                                                         $800,000,000




                                                                                      $0
                                                             Jennison Associates LLC
                                                Fidelity Management & Research Co.
                                                             Intel Corp. Pension Fund
                                                                    Artisan Partners LP
                                                 TIAA-CREF Asset Management LLC
                                                              BlackRock Advisors LLC
                                                        American Century Investment…
                                                   TCW Asset Management Co., Inc.
                                                                                                                                                                                                                                                                             VMware Inc.



                                            Waddell & Reed Investment Management…




 © Capital Markets Advisory Partners, LLC
                                                              OppenheimerFunds, Inc.
                                                    Wellington Management Co. LLP
                                                   Winslow Capital Management, Inc.
                                            Goodman & Co. Investment Counsel Ltd.
                                               Thrivent Investment Management, Inc.
                                                   Morgan Stanley Smith Barney LLC…
                                                Atlanta Capital Management Co. LLC
                                                                  AllianceBernstein LP
                                                      Renaissance Technologies LLC
                                                                        Conatus Capital
                                                          Two Sigma Investments LLC
                                                RBC Global Asset Management, Inc.
                                                  Columbia Management Investment…




22
                                              Norges Bank Investment Management
                                                   Criterion Capital Management LLC
                                                Highbridge Capital Management LLC
                                                                D. E. Shaw & Co., Inc.
                                                  Piedmont Investment Advisors LLC
                                                  Geneva Investment Management of…
                                                        Partner Fund Management LP
                                                  Sumitomo Trust & Banking Co. Ltd.…
                                                       Miura Global Management LLC
                                                    Michigan Department of Treasury
                                                                   Alydar Partners LLC
                                            Deutsche Bank Investment Management,…
                                               Neptune Investment Management Ltd.
                                                       RCM Capital Management LLC
                                            Morgan Stanley Investment Management,…
                                                      UBS Global Asset Management
                                                    Empire Capital Management LLC
                                                     Kleinheinz Capital Partners, Inc.
                                                    Victory Capital Management, Inc.
                                                Russell Investment Management Co.
                                                                                                                                                                                          are mostly smaller investors that are not the focus of large investment banks




                                                    Marvin & Palmer Associates, Inc.
                                                            S.A.C. Capital Advisors LP
                                            BlackRock Investment Management (UK)…
                                                             Loomis, Sayles & Co. LP
                                                                                                                                                                                          Top 50 fundamental institutional investors ranked by market value of shares held




                                            Legal & General Investment Management       …
                                                     Henderson Global Investors Ltd.
                                                                                                                                                                                                                                                                             Market Cap. $42.04 B




                                                  JPMorgan Asset Management, Inc.
                                                            Mackenzie Financial Corp.
Total Equity Assets




                                              firms
                                              bracket
                                              Coverage
                                              from bulge
                                                                                          $100,000,000,000
                                                                                                             $200,000,000,000
                                                                                                                                $300,000,000,000
                                                                                                                                                   $400,000,000,000
                                                                                                                                                                      $500,000,000,000
                                                                                                                                                                                         $600,000,000,000




                                                                                     $0




                                              erodes here
                                                             Jennison Associates LLC
                                                Fidelity Management & Research Co.
                                                             Intel Corp. Pension Fund
                                                                    Artisan Partners LP
                                                 TIAA-CREF Asset Management LLC
                                                              BlackRock Advisors LLC
                                                        American Century Investment…
                                                    TCW Asset Management Co., Inc.




 © Capital Markets Advisory Partners, LLC
                                            Waddell & Reed Investment Management…
                                                              OppenheimerFunds, Inc.
                                                                                                                                                                                                                                                                                                       VMware Inc.



                                                     Wellington Management Co. LLP
                                                   Winslow Capital Management, Inc.
                                            Goodman & Co. Investment Counsel Ltd.
                                               Thrivent Investment Management, Inc.
                                                   Morgan Stanley Smith Barney LLC…
                                                Atlanta Capital Management Co. LLC
                                                                  AllianceBernstein LP
                                                      Renaissance Technologies LLC
                                                                        Conatus Capital
                                                          Two Sigma Investments LLC
                                                RBC Global Asset Management, Inc.
                                                  Columbia Management Investment…




23
                                              Norges Bank Investment Management
                                                   Criterion Capital Management LLC
                                                Highbridge Capital Management LLC
                                                                D. E. Shaw & Co., Inc.
                                                  Piedmont Investment Advisors LLC
                                                  Geneva Investment Management of…
                                                        Partner Fund Management LP
                                                  Sumitomo Trust & Banking Co. Ltd.…
                                                       Miura Global Management LLC
                                                     Michigan Department of Treasury
                                                                   Alydar Partners LLC
                                            Deutsche Bank Investment Management,…
                                               Neptune Investment Management Ltd.
                                                       RCM Capital Management LLC
                                            Morgan Stanley Investment Management,…
                                                      UBS Global Asset Management
                                                     Empire Capital Management LLC
                                                      Kleinheinz Capital Partners, Inc.
                                                     Victory Capital Management, Inc.
                                                                                                                                                                                                            48% (24 of 50) of VMware investors are below the priority line of most investment banks.




                                                Russell Investment Management Co.
                                                     Marvin & Palmer Associates, Inc.
                                                            S.A.C. Capital Advisors LP
                                            BlackRock Investment Management (UK)…
                                                             Loomis, Sayles & Co. LP
                                            Legal & General Investment Management…
                                                      Henderson Global Investors Ltd.
                                                                                                                                                                                                                                                                                                        Market Cap. $42.04 B




                                                  JPMorgan Asset Management, Inc.
                                                            Mackenzie Financial Corp.
Market Value of Shares Held




                                                                                                                                      $80,000,000




                                                                                            $20,000,000
                                                                                                          $40,000,000
                                                                                                                        $60,000,000
                                                                                                                                                    $100,000,000
                                                                                                                                                                   $120,000,000
                                                                                                                                                                                  $140,000,000




                                                                                       $0
                                                   Fidelity Management & Research Co.
                                                         Wells Capital Management, Inc.
                                              Waddell & Reed Investment Management…
                                                             Fred Alger Management, Inc.
                                                       Century Capital Management LLC
                                                     Columbia Management Investment…
                                                     JPMorgan Asset Management, Inc.
                                                                     AllianceBernstein LP
                                                    Champlain Investment Partners LLC




 © Capital Markets Advisory Partners, LLC
                                                                                                                                                                                                                                                                                    LogMeIn Inc.




                                            Arbor Capital Management LLC (Minnesota)
                                                 Luther King Capital Management Corp.
                                                        Bluefin Investment Management
                                                     MFS Investment Management, Inc.
                                                                      Artisan Partners LP
                                               Deutsche Bank Investment Management,…
                                                                 OppenheimerFunds, Inc.
                                                     Next Century Growth Investors LLC
                                                      Aberdeen Asset Management, Inc.
                                                       ING Investment Management Co.
                                                                 Broadview Advisors LLC
                                                      Palisade Capital Management LLC
                                                       Ashford Capital Management, Inc.




24
                                                 Delaware Management Business Trust
                                                       Dreyfus Investment Advisors, Inc.
                                                       Chartwell Investment Partners LP
                                                     Columbia Partners LLC Investment…
                                                              Adage Capital Advisors LLC
                                             Robeco Institutional Asset Management BV
                                                                   Emerald Advisers, Inc.
                                                    TIAA-CREF Asset Management LLC
                                                         Renaissance Technologies LLC
                                                 Mutual of America Capital Management…
                                                          Bank of New York Mellon Asset…
                                                   Russell Investment Management Co.
                                                  NCM Capital Management Group, Inc.
                                                                     Harvey Partners LLC
                                                            Invesco PowerShares Capital…
                                                   RS Investment Management Co. LLC
                                                      Chinook Capital Management LLC
                                                        Sigma Capital Management LLC
                                                                         Azimut SGR SpA
                                                      Oberweis Asset Management, Inc.
                                                                                                                                                                                                 are mostly smaller investors that are not the focus of large investment banks




                                                 Goldman Sachs Asset Management LP
                                               BlackRock Investment Management (UK)…
                                                  Norges Bank Investment Management
                                                      Copper Rock Capital Partners LLC
                                                                                                                                                                                                 Top 50 fundamental institutional investors ranked by market value of shares held




                                                                 BlackRock Advisors LLC
                                                MacGuire, Cheswick & Tuttle Investment…
                                                                                                                                                                                                                                                                                    Market Cap. $1.02 B




                                            The Public Sector Pension Investment Board
                                                           Principal Global Investors LLC
Total Equity Assets




                                                                                              $100,000,000,000
                                                                                                                 $200,000,000,000
                                                                                                                                    $300,000,000,000
                                                                                                                                                       $400,000,000,000
                                                                                                                                                                          $500,000,000,000
                                                                                                                                                                                             $600,000,000,000




                                                                                         $0
                                                   Fidelity Management & Research Co.
                                                         Wells Capital Management, Inc.
                                              Waddell & Reed Investment Management…
                                                             Fred Alger Management, Inc.
                                                       Century Capital Management LLC
                                                     Columbia Management Investment…
                                                     JPMorgan Asset Management, Inc.
                                                                     AllianceBernstein LP




 © Capital Markets Advisory Partners, LLC
                                                    Champlain Investment Partners LLC
                                            Arbor Capital Management LLC (Minnesota)
                                                 Luther King Capital Management Corp.
                                                                                                                                                                                                                                                                                                            LogMeIn Inc.




                                                        Bluefin Investment Management
                                                     MFS Investment Management, Inc.
                                                                      Artisan Partners LP
                                               Deutsche Bank Investment Management,…
                                                                 OppenheimerFunds, Inc.
                                                     Next Century Growth Investors LLC
                                                      Aberdeen Asset Management, Inc.
                                                       ING Investment Management Co.
                                                                 Broadview Advisors LLC
                                                      Palisade Capital Management LLC
                                                       Ashford Capital Management, Inc.




25
                                                 Delaware Management Business Trust
                                                       Dreyfus Investment Advisors, Inc.
                                                       Chartwell Investment Partners LP
                                                     Columbia Partners LLC Investment…
                                                              Adage Capital Advisors LLC
                                             Robeco Institutional Asset Management BV
                                                                   Emerald Advisers, Inc.
                                                    TIAA-CREF Asset Management LLC
                                                         Renaissance Technologies LLC
                                                 Mutual of America Capital Management     …
                                                          Bank of New York Mellon Asset…
                                                   Russell Investment Management Co.
                                                  NCM Capital Management Group, Inc.
                                                                     Harvey Partners LLC
                                                            Invesco PowerShares Capital…
                                                   RS Investment Management Co. LLC
                                                      Chinook Capital Management LLC
                                                        Sigma Capital Management LLC
                                                                         Azimut SGR SpA
                                                      Oberweis Asset Management, Inc.
                                                 Goldman Sachs Asset Management LP
                                               BlackRock Investment Management (UK)…
                                                  Norges Bank Investment Management
                                                      Copper Rock Capital Partners LLC
                                                                 BlackRock Advisors LLC
                                                                                                                                                                                                                58% (29 of 50) of LogMeIn investors are below the priority line of most investment banks.




                                                MacGuire, Cheswick & Tuttle Investment…
                                                                                                                                                                                                                                                                                                             Market Cap. $1.02 B




                                            The Public Sector Pension Investment Board
                                                           Principal Global Investors LLC
Market Value of Shares Held




                                                                                                                            $30,000,000
                                                                                                                                                                      $60,000,000




                                                                                                $10,000,000
                                                                                                              $20,000,000
                                                                                                                                          $40,000,000
                                                                                                                                                        $50,000,000
                                                                                                                                                                                    $70,000,000
                                                                                                                                                                                                  $80,000,000




                                                                                          $0
                                                     Fidelity Management & Research Co.
                                             Columbia Wanger Asset Management LLC
                                              Waddell & Reed Investment Management…
                                                      Allianz Global Investors Capital LLC
                                                                   BlackRock Advisors LLC
                                                      Champlain Investment Partners LLC
                                                                     First Trust Advisors LP
                                                              St. Denis J. Villere & Co. LLC
                                                    Frontier Capital Management Co. LLC




 © Capital Markets Advisory Partners, LLC
                                                                       Citadel Advisors LLC
                                                Granahan Investment Management, Inc.
                                              The Boston Company Asset Management           …
                                                                Wall Street Associates LLC
                                                                  Riverbridge Partners LLC
                                                         Sentinel Asset Management, Inc.
                                                       MFS Investment Management, Inc.
                                                                                                                                                                                                                                                                                                   Constant Contact Inc.




                                                 Federated Investment Management Co.
                                                                     Lord Abbett & Co. LLC
                                                                    Gagnon Securities LLC
                                                                       Welch & Forbes LLC
                                                        Ashford Capital Management, Inc.
                                                                   Kalmar Investments, Inc.




26
                                                              FIL Investments International
                                                         Wellington Management Co. LLP
                                                              Federated Global Investment…
                                                         Northern Trust Co. of Connecticut
                                                         Dreyfus Investment Advisors, Inc.
                                            Scottish Widows Investment Partnership Ltd.
                                                            Bank of New York Mellon Asset…
                                                            Wells Capital Management, Inc.
                                                              Pictet Asset Management SA
                                             Ohio Public Employees Retirement System
                                                      Ensemble Capital Management LLC
                                                   Investor AB (Investment Management)
                                                  Attractor Investment Management, Inc.
                                                      TIAA-CREF Asset Management LLC
                                                                  Coatue Management LLC
                                             New York State Common Retirement Fund
                                                  Norges Bank Investment Management
                                                           Cortina Asset Management LLC
                                                        Aberdeen Asset Management, Inc.
                                                                       P.A.W. Capital Corp.
                                                                                                                                                                                                                are mostly smaller investors that are not the focus of large investment banks




                                                         Geneva Capital Management Ltd.
                                                                        UBS O'Connor LLC
                                                   Washington Capital Management, Inc.
                                                            Oxford Asset Management LLP
                                                                                                                                                                                                                Top 50 fundamental institutional investors ranked by market value of shares held




                                                       William Blair & Co. LLC (Investment…
                                                             Kopp Investment Advisors LLC
                                                                                                                                                                                                                                                                                                    Market Cap. $0.66B




                                                Essex Investment Management Co. LLC
                                                        Oberweis Asset Management, Inc.
Total Equity Assets




                                                                                                $100,000,000,000
                                                                                                                   $200,000,000,000
                                                                                                                                      $300,000,000,000
                                                                                                                                                         $400,000,000,000
                                                                                                                                                                            $500,000,000,000
                                                                                                                                                                                               $600,000,000,000




                                                                                          $0
                                                     Fidelity Management & Research Co.
                                             Columbia Wanger Asset Management LLC
                                              Waddell & Reed Investment Management…
                                                      Allianz Global Investors Capital LLC
                                                                   BlackRock Advisors LLC
                                                      Champlain Investment Partners LLC
                                                                     First Trust Advisors LP
                                                              St. Denis J. Villere & Co. LLC




 © Capital Markets Advisory Partners, LLC
                                                    Frontier Capital Management Co. LLC
                                                                       Citadel Advisors LLC
                                                Granahan Investment Management, Inc.
                                              The Boston Company Asset Management           …
                                                                Wall Street Associates LLC
                                                                  Riverbridge Partners LLC
                                                         Sentinel Asset Management, Inc.
                                                       MFS Investment Management, Inc.
                                                 Federated Investment Management Co.
                                                                     Lord Abbett & Co. LLC
                                                                    Gagnon Securities LLC
                                                                       Welch & Forbes LLC
                                                                                                                                                                                                                                                                                                                       Constant Contact Inc.




                                                        Ashford Capital Management, Inc.
                                                                   Kalmar Investments, Inc.




27
                                                              FIL Investments International
                                                         Wellington Management Co. LLP
                                                              Federated Global Investment…
                                                         Northern Trust Co. of Connecticut
                                                         Dreyfus Investment Advisors, Inc.
                                            Scottish Widows Investment Partnership Ltd.
                                                            Bank of New York Mellon Asset…
                                                            Wells Capital Management, Inc.
                                                              Pictet Asset Management SA
                                             Ohio Public Employees Retirement System
                                                      Ensemble Capital Management LLC
                                                   Investor AB (Investment Management)
                                                  Attractor Investment Management, Inc.
                                                      TIAA-CREF Asset Management LLC
                                                                  Coatue Management LLC
                                             New York State Common Retirement Fund
                                                  Norges Bank Investment Management
                                                           Cortina Asset Management LLC
                                                        Aberdeen Asset Management, Inc.
                                                                       P.A.W. Capital Corp.
                                                         Geneva Capital Management Ltd.
                                                                        UBS O'Connor LLC
                                                   Washington Capital Management, Inc.
                                                            Oxford Asset Management LLP
                                                                                                                                                                                                                  68% (34 of 50) of Constant Contact investors are below the priority line of most investment banks.




                                                       William Blair & Co. LLC (Investment…
                                                             Kopp Investment Advisors LLC
                                                                                                                                                                                                                                                                                                                         Market Cap. $0.66 B




                                                Essex Investment Management Co. LLC
                                                        Oberweis Asset Management, Inc.
Appendix




© Capital Markets Advisory Partners, LLC
                                               28
Less than one-third of very small IPOs (< $50
    million) are successful in today’s market

                                                                              Success rate of trailing 30 IPO filings
                                                                                  with proceeds < $50 million




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.
© Capital Markets Advisory Partners, LLC
                                                                              29
IPOs that raise $50-$100 million

                                                                              Success rate of trailing 30 IPO filings
                                                                               with proceeds of $50-$100 million




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.

© Capital Markets Advisory Partners, LLC
                                                                              30
IPOs that raise $100-$250 million

                                                                                    Success rate of trailing 30
                                                                                   IPO filings with proceeds of
                                                                                       $100-$250 million




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.

© Capital Markets Advisory Partners, LLC
                                                                              31
IPOs that raise $250-$500 million

                                                                              Success rate of trailing 30 IPO filings
                                                                               with proceeds of $250-$500 million




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.

© Capital Markets Advisory Partners, LLC
                                                                              32
IPOs that have priced within 1 year of filing—
    trailing 30 filings




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.

© Capital Markets Advisory Partners, LLC
                                                                              33
IPOs that have priced at or above the low end of
    the range—trailing 30 filings




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.

© Capital Markets Advisory Partners, LLC
                                                                              34
IPOs that are trading at or above issue price 30
    days after pricing—trailing 30 filings




    Source: Capital Markets Advisory Partners, LLC, All rights reserved
    Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs.
© Capital Markets Advisory Partners, LLC
                                                                              35
Capital Markets Advisory Partners
    About Capital Markets Advisory Partners, LLC                                 been cited by Members of Congress and Regulators in the US and
                                                                                 overseas and by leading publications including, The
    Capital Markets Advisory Partners is a pioneer in developing                 Economist, Forbes, The Financial Times, The New York Times and
    methods to dramatically increase the size and quality of distribution        The Wall Street Journal.
    on IPOs and follow-on offerings. Collectively, we bring hundreds
    of years of experience from leading institutions.                            Recently, this work was also cited in:
                                                                                 • The President’s Council on Jobs and Competitiveness (Jobs
    Studies authored by two of our principals (David Weild and Edward              Council) Interim Report led by Jeffrey Immelt of General Electric
    Kim) and supported and published by the major accounting, tax                • The IPO Task Force Report to the US Treasury, led by Kate
    and advisory firm of Grant Thornton have been entered into the                 Mitchell, past Chairman of the National Venture Capital
    Congressional Record and the Federal Register and our principals               Association.
    have participated in or testified in front of:
    • The NYSE and National Venture Capital Association’s (NVCA)                 Capital Markets Advisory Partners was founded by David Weild, the
      Blue Ribbon Panel to restore liquidity in the US venture capital           former vice chairman and head of listed companies and related
      industry (2009)                                                            businesses at NASDAQ and former head of equity capital markets
    • The CFTC-SEC Joint Panel on Emerging Regulatory Issues                     and corporate finance at Prudential Securities. David also serves as
      (2010)                                                                     Chairman of the Small Business Financing Crisis Task Force of the
    • The House Financial Services Committee’s Subcommittee on                   ISEEE (International Stock Exchange Executives Emeriti).
      Capital Markets (2011)
    • The U.S. Treasury’s Capital Formation Conference (2011).




    These studies, supported and published by Grant Thornton, have

© Capital Markets Advisory Partners, LLC
                                                                            36
The IPO Crisis And What Must Be Done To
   Fix It: Market structure is too low cost to pay for the
   infrastructure needed to support capital formation.
   Improved strategies are needed. We offer some.
   SoHo Loft
   Reed Smith
   599 Lexington Avenue
   22nd Floor
   New York, NY
   January 22-23, 2012
   David Weild
   212.542.9979
   david.weild@cmapartners.com


© Capital Markets Advisory Partners, LLC

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So ho loft capital markets advisory partners 1-23-2012

  • 1. The IPO Crisis And What Must Be Done To Fix It: Market structure is too low cost to pay for the infrastructure needed to support capital formation. Improved strategies are needed. We offer some. SoHo Loft Reed Smith 599 Lexington Avenue 22nd Floor New York, NY January 22-23, 2012 David Weild 212.542.9979 david.weild@cmapartners.com © Capital Markets Advisory Partners, LLC
  • 2. Our Focus • Change Agent (Supported by Grant Thornton) – Studies • Why are IPOs in the ICU? • A wake up call for America • Market structure is causing the IPO crisis – and more • Killing the stock market that laid the golden eggs (pending chapter in “Broken Markets” to be published by John Wiley & Sons) – Citations • Congress, Senate, SEC • IPO Task Force Report to the US Treasury • Jeffrey Immelt led Jobs Council Report to the White House • Solutions for Issuers (Capital Markets Advisory Partners) – How to significantly increase size and quality of institutional demand. • Cut deal execution risk • Improve price • Improve aftermarket performance © Capital Markets Advisory Partners, LLC 2
  • 3. The small IPO market collapsed with the OHRs and Reg. ATS (loss of B/D incentives) As seen in the study "Market structure is causing the IPO crisis—and more" Percent of total U.S. IPOs 100% Allegations of Spread Fixing (1994) 90% Manning Rule (1996) Transactions raising at least $50 million 80% OHRs (1997) Regulation ATS (1998) 70% 60% Decimalization (2001) 50% Sarbanes-Oxley (2002) 40% Reg. NMS (2005) 30% 20% 10% Transactions raising less than $50 million 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Sources: Grant Thornton LLP, Capital Markets Advisory Partners and Dealogic YTD Data includes corporate IPOs as of 6/30/11, excluding funds, REITs, SPACs and LPs © Capital Markets Advisory Partners, LLC 3
  • 4. A catastrophic fall in the number of listed companies (43%) As seen in the study "A wake up call for America"* 200 China Indexed value of selected global exchange listings 150 Hong Kong 100 Australia (1997 = 0) 50 Germany Tokyo 0 London Toronto (50) United States (100) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Sources: Grant Thornton LLP, Capital Markets Advisory Partners, World Federation of Exchanges and individual stock exchanges YTD *March 16, 2011; House Financial Services Committee “Hearing on Legislative Proposals to Promote Job Growth, Capital Formation and Market Certainty” statement by David Weild © Capital Markets Advisory Partners, LLC 4
  • 5. Current legislation will help but won’t do nearly enough to fix our stock markets. Private Disclosure Public Standards • H.R. 1070 (Reg. A) • H.R. 2930 (crowdfunding) Private Private Public Public • H.R. 1070 (Reg. A) • H.R. 1965 (banks; 500-2,000 shareholders) • H.R. 2940 (general solicitation, Reg. D) • H.R. 2930 (crowdfunding) • H.R. 2167 (500-1,000 shareholders) © Capital Markets Advisory Partners, LLC
  • 6. IPO success rates have been in sustained decline for nearly two decades, despite deals that are increasing in average size and maturity Success rate of trailing 30 IPO filings Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 6
  • 7. Unprecedented volatility (S&P 500) Standard & Poor's 500 index moves of 4% or higher Intraday price volatility Closing price volatility 4% 4% 3% 3% 2% 2% Excluding 2008 and 2009 1% 1% 0% 0% 1960s 1970s 1980s 1990s 2000s 2010s* 1960s 1970s 1980s 1990s 2000s 2010s* *Analysis through 9/30/11 Source: Grant Thornton LLP, Capital Markets Advisory Partners and Capital IQ Original analysis from "Market Swings are Becoming New Standard," New York Times, September 11, 2011 © Capital Markets Advisory Partners, LLC 7
  • 8. IPOs take > 3 times as long to get through the SEC than they did 20 years ago Number of days in registration (Trailing 30-deal average) © Capital Markets Advisory Partners, LLC 8
  • 9. We would have enjoyed a venture-backed post 1990s 'IPO Echo Boom,' but Reg. ATS killed it $120 U.S. Venture Capital Raised (In Billions) Source: National Venture Capital Association Data as of 6/30/11 $100 $80 $60 $40 $20 $0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD "Penny Stocks" Deal Size < $50 Milllion Deal Size ≥ $50 Million U.S. Unemployment Rate 12% 900 Sources: Grant Thornton LLP, Capital Markets Advisory Partners, Dealogic and U.S. Department of Labor Data includes corporate IPOs as of 6/30/11, excluding funds, REITs, SPACs and LPs 800 10% U.S. Unemployment Rate 700 Number of U.S. IPOs 8% 600 500 6% 400 4% 300 200 2% 100 0% 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD © Capital Markets Advisory Partners, LLC 9
  • 10. We believe the loss of small IPOs is a major contributor to job loss in the United States As seen in the study "Market structure is causing the IPO crisis— and more" "Penny Stocks" Deal Size < $50 Milllion Deal Size ≥ $50 Million U.S. Unemployment Rate 12% 900 800 10% 700 U.S. Unemployment Rate 8% 600 Number of U.S. IPOs 500 6% 400 4% 300 200 2% 100 0% 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD Sources: Grant Thornton LLP, Capital Markets Advisory Partners, Dealogic and U.S. Department of Labor Data includes corporate IPOs as of 6/30/11, excluding funds, REITs, SPACs and LPs © Capital Markets Advisory Partners, LLC 10
  • 11. We should be approaching 1,000 IPOs/year and < 5% unemployment U.S. IPOs (Actual) U.S. IPOs (Projected) U.S. Unemployment Rate (Actual) U.S. Unemployment Rate (Projected) 12% 1,000 900 10% 800 700 8% U.S. Unemployment Rate Number of U.S. IPOs 600 6% 500 400 4% 300 200 2% 100 0% - 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Est. Est. Est. The 'U.S. IPOs (Projected)' estimate assumes 520 IPOs per year starting in 1991 with a 3% compound annual growth rate equivalent to the U.S. GDP growth rate. A simple linear regression model was created using historical data to predict the 'U.S. Unemployment Rate (Projected)' based on this number of projected IPOs. Sources: Grant Thornton LLP, Capital Markets Advisory Partners, Dealogic and U.S. Department of Labor Data includes corporate IPOs as of 6/30/11, excluding funds, REITs, SPACs and LPs © Capital Markets Advisory Partners, LLC 11
  • 12. IPOs > $500 million have demonstrated the steepest decline of all Success rate of trailing 30 IPO filings with proceeds of at least $500 million Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 12
  • 13. Loss of the Ecosystem: Underwriting Groups Microsoft’s IPO (1986) vs. LinkedIn’s IPO (2011) © Capital Markets Advisory Partners, LLC 13
  • 14. Microsoft IPO: $58,695,000 March 13, 1986 Underwriter Table from Final Prospectus 116 Underwriters (p. 1 of 3) Source: Microsoft IPO Final Prospectus, Capital Markets Advisory Partners, LLC. © Capital Markets Advisory Partners, LLC 14
  • 15. Microsoft IPO: $58,695,000 March 13, 1986 Underwriter Table from Final Prospectus 116 underwriters (p. 2 of 3) Source: Microsoft IPO Final Prospectus, Capital Markets Advisory Partners, LLC. © Capital Markets Advisory Partners, LLC 15
  • 16. Microsoft IPO: $58,695,000 March 13, 1986 Underwriter Table from Final Prospectus 116 underwriters (p. 3 of 3) Source: Microsoft IPO Final Prospectus, Capital Markets Advisory Partners, LLC. © Capital Markets Advisory Partners, LLC 16
  • 17. LinkedIn IPO: $352,800,000 May 18, 2011 Underwriter Table from Final Prospectus 5 underwriters Source: LinkedIn IPO Final Prospectus © Capital Markets Advisory Partners, LLC 17
  • 18. Two Solutions (Both address the economic model) • Issuer’s Choice - Board Chooses “Tick Size” - Issuers deserve choice in how the market in their shares is made and supported (“Mass Customization”) – Issuer Boards of Directors should be allowed to determine „tick size‟ which would cost little to implement and provide an important tool to impact support (research, sales and capital) and modulate speculative trading and volatility. • Alternative Sub $2 Billion Market Cap Stock Market - Issuers (and Americans) deserve a sub-$2 billion market cap stock market structured to create focus on capital formation and job creation (see Wall Street Journal Op- ed dated October 28, 2011, entitled “How to Revive Small-Cap IPOs”) © Capital Markets Advisory Partners, LLC 18
  • 19. Capital Markets Advisory Partners: Solutions for Issuers © Capital Markets Advisory Partners, LLC 19
  • 20. The best investors are now self-directed. We work with management to reach them. Wall Street Adjusted We help Issuers Adjust (Each change increased selling) (Each step increases placement) • Focused on big, large cap • Methods to reach the self- funds directed 2/3rds of the • Focused on big, high institutional market turnover funds • Methods to minimize • Shut down middle-market selling pressure institutional sales forces • Methods to promote retail • Converted retail from stock ownership broking to asset gathering • Campaign to improve the stock markets for issuers © Capital Markets Advisory Partners, LLC 20
  • 21. Wall Street Not Reaching Best Investors Distribution of fundamentally oriented U.S. institutions in 2010 Each tier = 100* institutions ranked by equity assets (e.g., 1st tier = top 100 institutions) Market Value ≤ $2 billion Market Value > $2 billion $8,000,000,000,000 $7,000,000,000,000 2010 $6,000,000,000,000 $5,000,000,000,000 Equity Assets $4,000,000,000,000 $3,000,000,000,000 $2,000,000,000,000 $1,000,000,000,000 $0 Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 *36th tier = 43 institutions © Capital Markets Advisory Partners, LLC 21
  • 22. Market Value of Shares Held $1,000,000,000 $1,200,000,000 $200,000,000 $400,000,000 $600,000,000 $800,000,000 $0 Jennison Associates LLC Fidelity Management & Research Co. Intel Corp. Pension Fund Artisan Partners LP TIAA-CREF Asset Management LLC BlackRock Advisors LLC American Century Investment… TCW Asset Management Co., Inc. VMware Inc. Waddell & Reed Investment Management… © Capital Markets Advisory Partners, LLC OppenheimerFunds, Inc. Wellington Management Co. LLP Winslow Capital Management, Inc. Goodman & Co. Investment Counsel Ltd. Thrivent Investment Management, Inc. Morgan Stanley Smith Barney LLC… Atlanta Capital Management Co. LLC AllianceBernstein LP Renaissance Technologies LLC Conatus Capital Two Sigma Investments LLC RBC Global Asset Management, Inc. Columbia Management Investment… 22 Norges Bank Investment Management Criterion Capital Management LLC Highbridge Capital Management LLC D. E. Shaw & Co., Inc. Piedmont Investment Advisors LLC Geneva Investment Management of… Partner Fund Management LP Sumitomo Trust & Banking Co. Ltd.… Miura Global Management LLC Michigan Department of Treasury Alydar Partners LLC Deutsche Bank Investment Management,… Neptune Investment Management Ltd. RCM Capital Management LLC Morgan Stanley Investment Management,… UBS Global Asset Management Empire Capital Management LLC Kleinheinz Capital Partners, Inc. Victory Capital Management, Inc. Russell Investment Management Co. are mostly smaller investors that are not the focus of large investment banks Marvin & Palmer Associates, Inc. S.A.C. Capital Advisors LP BlackRock Investment Management (UK)… Loomis, Sayles & Co. LP Top 50 fundamental institutional investors ranked by market value of shares held Legal & General Investment Management … Henderson Global Investors Ltd. Market Cap. $42.04 B JPMorgan Asset Management, Inc. Mackenzie Financial Corp.
  • 23. Total Equity Assets firms bracket Coverage from bulge $100,000,000,000 $200,000,000,000 $300,000,000,000 $400,000,000,000 $500,000,000,000 $600,000,000,000 $0 erodes here Jennison Associates LLC Fidelity Management & Research Co. Intel Corp. Pension Fund Artisan Partners LP TIAA-CREF Asset Management LLC BlackRock Advisors LLC American Century Investment… TCW Asset Management Co., Inc. © Capital Markets Advisory Partners, LLC Waddell & Reed Investment Management… OppenheimerFunds, Inc. VMware Inc. Wellington Management Co. LLP Winslow Capital Management, Inc. Goodman & Co. Investment Counsel Ltd. Thrivent Investment Management, Inc. Morgan Stanley Smith Barney LLC… Atlanta Capital Management Co. LLC AllianceBernstein LP Renaissance Technologies LLC Conatus Capital Two Sigma Investments LLC RBC Global Asset Management, Inc. Columbia Management Investment… 23 Norges Bank Investment Management Criterion Capital Management LLC Highbridge Capital Management LLC D. E. Shaw & Co., Inc. Piedmont Investment Advisors LLC Geneva Investment Management of… Partner Fund Management LP Sumitomo Trust & Banking Co. Ltd.… Miura Global Management LLC Michigan Department of Treasury Alydar Partners LLC Deutsche Bank Investment Management,… Neptune Investment Management Ltd. RCM Capital Management LLC Morgan Stanley Investment Management,… UBS Global Asset Management Empire Capital Management LLC Kleinheinz Capital Partners, Inc. Victory Capital Management, Inc. 48% (24 of 50) of VMware investors are below the priority line of most investment banks. Russell Investment Management Co. Marvin & Palmer Associates, Inc. S.A.C. Capital Advisors LP BlackRock Investment Management (UK)… Loomis, Sayles & Co. LP Legal & General Investment Management… Henderson Global Investors Ltd. Market Cap. $42.04 B JPMorgan Asset Management, Inc. Mackenzie Financial Corp.
  • 24. Market Value of Shares Held $80,000,000 $20,000,000 $40,000,000 $60,000,000 $100,000,000 $120,000,000 $140,000,000 $0 Fidelity Management & Research Co. Wells Capital Management, Inc. Waddell & Reed Investment Management… Fred Alger Management, Inc. Century Capital Management LLC Columbia Management Investment… JPMorgan Asset Management, Inc. AllianceBernstein LP Champlain Investment Partners LLC © Capital Markets Advisory Partners, LLC LogMeIn Inc. Arbor Capital Management LLC (Minnesota) Luther King Capital Management Corp. Bluefin Investment Management MFS Investment Management, Inc. Artisan Partners LP Deutsche Bank Investment Management,… OppenheimerFunds, Inc. Next Century Growth Investors LLC Aberdeen Asset Management, Inc. ING Investment Management Co. Broadview Advisors LLC Palisade Capital Management LLC Ashford Capital Management, Inc. 24 Delaware Management Business Trust Dreyfus Investment Advisors, Inc. Chartwell Investment Partners LP Columbia Partners LLC Investment… Adage Capital Advisors LLC Robeco Institutional Asset Management BV Emerald Advisers, Inc. TIAA-CREF Asset Management LLC Renaissance Technologies LLC Mutual of America Capital Management… Bank of New York Mellon Asset… Russell Investment Management Co. NCM Capital Management Group, Inc. Harvey Partners LLC Invesco PowerShares Capital… RS Investment Management Co. LLC Chinook Capital Management LLC Sigma Capital Management LLC Azimut SGR SpA Oberweis Asset Management, Inc. are mostly smaller investors that are not the focus of large investment banks Goldman Sachs Asset Management LP BlackRock Investment Management (UK)… Norges Bank Investment Management Copper Rock Capital Partners LLC Top 50 fundamental institutional investors ranked by market value of shares held BlackRock Advisors LLC MacGuire, Cheswick & Tuttle Investment… Market Cap. $1.02 B The Public Sector Pension Investment Board Principal Global Investors LLC
  • 25. Total Equity Assets $100,000,000,000 $200,000,000,000 $300,000,000,000 $400,000,000,000 $500,000,000,000 $600,000,000,000 $0 Fidelity Management & Research Co. Wells Capital Management, Inc. Waddell & Reed Investment Management… Fred Alger Management, Inc. Century Capital Management LLC Columbia Management Investment… JPMorgan Asset Management, Inc. AllianceBernstein LP © Capital Markets Advisory Partners, LLC Champlain Investment Partners LLC Arbor Capital Management LLC (Minnesota) Luther King Capital Management Corp. LogMeIn Inc. Bluefin Investment Management MFS Investment Management, Inc. Artisan Partners LP Deutsche Bank Investment Management,… OppenheimerFunds, Inc. Next Century Growth Investors LLC Aberdeen Asset Management, Inc. ING Investment Management Co. Broadview Advisors LLC Palisade Capital Management LLC Ashford Capital Management, Inc. 25 Delaware Management Business Trust Dreyfus Investment Advisors, Inc. Chartwell Investment Partners LP Columbia Partners LLC Investment… Adage Capital Advisors LLC Robeco Institutional Asset Management BV Emerald Advisers, Inc. TIAA-CREF Asset Management LLC Renaissance Technologies LLC Mutual of America Capital Management … Bank of New York Mellon Asset… Russell Investment Management Co. NCM Capital Management Group, Inc. Harvey Partners LLC Invesco PowerShares Capital… RS Investment Management Co. LLC Chinook Capital Management LLC Sigma Capital Management LLC Azimut SGR SpA Oberweis Asset Management, Inc. Goldman Sachs Asset Management LP BlackRock Investment Management (UK)… Norges Bank Investment Management Copper Rock Capital Partners LLC BlackRock Advisors LLC 58% (29 of 50) of LogMeIn investors are below the priority line of most investment banks. MacGuire, Cheswick & Tuttle Investment… Market Cap. $1.02 B The Public Sector Pension Investment Board Principal Global Investors LLC
  • 26. Market Value of Shares Held $30,000,000 $60,000,000 $10,000,000 $20,000,000 $40,000,000 $50,000,000 $70,000,000 $80,000,000 $0 Fidelity Management & Research Co. Columbia Wanger Asset Management LLC Waddell & Reed Investment Management… Allianz Global Investors Capital LLC BlackRock Advisors LLC Champlain Investment Partners LLC First Trust Advisors LP St. Denis J. Villere & Co. LLC Frontier Capital Management Co. LLC © Capital Markets Advisory Partners, LLC Citadel Advisors LLC Granahan Investment Management, Inc. The Boston Company Asset Management … Wall Street Associates LLC Riverbridge Partners LLC Sentinel Asset Management, Inc. MFS Investment Management, Inc. Constant Contact Inc. Federated Investment Management Co. Lord Abbett & Co. LLC Gagnon Securities LLC Welch & Forbes LLC Ashford Capital Management, Inc. Kalmar Investments, Inc. 26 FIL Investments International Wellington Management Co. LLP Federated Global Investment… Northern Trust Co. of Connecticut Dreyfus Investment Advisors, Inc. Scottish Widows Investment Partnership Ltd. Bank of New York Mellon Asset… Wells Capital Management, Inc. Pictet Asset Management SA Ohio Public Employees Retirement System Ensemble Capital Management LLC Investor AB (Investment Management) Attractor Investment Management, Inc. TIAA-CREF Asset Management LLC Coatue Management LLC New York State Common Retirement Fund Norges Bank Investment Management Cortina Asset Management LLC Aberdeen Asset Management, Inc. P.A.W. Capital Corp. are mostly smaller investors that are not the focus of large investment banks Geneva Capital Management Ltd. UBS O'Connor LLC Washington Capital Management, Inc. Oxford Asset Management LLP Top 50 fundamental institutional investors ranked by market value of shares held William Blair & Co. LLC (Investment… Kopp Investment Advisors LLC Market Cap. $0.66B Essex Investment Management Co. LLC Oberweis Asset Management, Inc.
  • 27. Total Equity Assets $100,000,000,000 $200,000,000,000 $300,000,000,000 $400,000,000,000 $500,000,000,000 $600,000,000,000 $0 Fidelity Management & Research Co. Columbia Wanger Asset Management LLC Waddell & Reed Investment Management… Allianz Global Investors Capital LLC BlackRock Advisors LLC Champlain Investment Partners LLC First Trust Advisors LP St. Denis J. Villere & Co. LLC © Capital Markets Advisory Partners, LLC Frontier Capital Management Co. LLC Citadel Advisors LLC Granahan Investment Management, Inc. The Boston Company Asset Management … Wall Street Associates LLC Riverbridge Partners LLC Sentinel Asset Management, Inc. MFS Investment Management, Inc. Federated Investment Management Co. Lord Abbett & Co. LLC Gagnon Securities LLC Welch & Forbes LLC Constant Contact Inc. Ashford Capital Management, Inc. Kalmar Investments, Inc. 27 FIL Investments International Wellington Management Co. LLP Federated Global Investment… Northern Trust Co. of Connecticut Dreyfus Investment Advisors, Inc. Scottish Widows Investment Partnership Ltd. Bank of New York Mellon Asset… Wells Capital Management, Inc. Pictet Asset Management SA Ohio Public Employees Retirement System Ensemble Capital Management LLC Investor AB (Investment Management) Attractor Investment Management, Inc. TIAA-CREF Asset Management LLC Coatue Management LLC New York State Common Retirement Fund Norges Bank Investment Management Cortina Asset Management LLC Aberdeen Asset Management, Inc. P.A.W. Capital Corp. Geneva Capital Management Ltd. UBS O'Connor LLC Washington Capital Management, Inc. Oxford Asset Management LLP 68% (34 of 50) of Constant Contact investors are below the priority line of most investment banks. William Blair & Co. LLC (Investment… Kopp Investment Advisors LLC Market Cap. $0.66 B Essex Investment Management Co. LLC Oberweis Asset Management, Inc.
  • 28. Appendix © Capital Markets Advisory Partners, LLC 28
  • 29. Less than one-third of very small IPOs (< $50 million) are successful in today’s market Success rate of trailing 30 IPO filings with proceeds < $50 million Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 29
  • 30. IPOs that raise $50-$100 million Success rate of trailing 30 IPO filings with proceeds of $50-$100 million Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 30
  • 31. IPOs that raise $100-$250 million Success rate of trailing 30 IPO filings with proceeds of $100-$250 million Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 31
  • 32. IPOs that raise $250-$500 million Success rate of trailing 30 IPO filings with proceeds of $250-$500 million Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 32
  • 33. IPOs that have priced within 1 year of filing— trailing 30 filings Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 33
  • 34. IPOs that have priced at or above the low end of the range—trailing 30 filings Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 34
  • 35. IPOs that are trading at or above issue price 30 days after pricing—trailing 30 filings Source: Capital Markets Advisory Partners, LLC, All rights reserved Includes only corporate issuers. Excludes funds, MLPs, SPACs and REITs. © Capital Markets Advisory Partners, LLC 35
  • 36. Capital Markets Advisory Partners About Capital Markets Advisory Partners, LLC been cited by Members of Congress and Regulators in the US and overseas and by leading publications including, The Capital Markets Advisory Partners is a pioneer in developing Economist, Forbes, The Financial Times, The New York Times and methods to dramatically increase the size and quality of distribution The Wall Street Journal. on IPOs and follow-on offerings. Collectively, we bring hundreds of years of experience from leading institutions. Recently, this work was also cited in: • The President’s Council on Jobs and Competitiveness (Jobs Studies authored by two of our principals (David Weild and Edward Council) Interim Report led by Jeffrey Immelt of General Electric Kim) and supported and published by the major accounting, tax • The IPO Task Force Report to the US Treasury, led by Kate and advisory firm of Grant Thornton have been entered into the Mitchell, past Chairman of the National Venture Capital Congressional Record and the Federal Register and our principals Association. have participated in or testified in front of: • The NYSE and National Venture Capital Association’s (NVCA) Capital Markets Advisory Partners was founded by David Weild, the Blue Ribbon Panel to restore liquidity in the US venture capital former vice chairman and head of listed companies and related industry (2009) businesses at NASDAQ and former head of equity capital markets • The CFTC-SEC Joint Panel on Emerging Regulatory Issues and corporate finance at Prudential Securities. David also serves as (2010) Chairman of the Small Business Financing Crisis Task Force of the • The House Financial Services Committee’s Subcommittee on ISEEE (International Stock Exchange Executives Emeriti). Capital Markets (2011) • The U.S. Treasury’s Capital Formation Conference (2011). These studies, supported and published by Grant Thornton, have © Capital Markets Advisory Partners, LLC 36
  • 37. The IPO Crisis And What Must Be Done To Fix It: Market structure is too low cost to pay for the infrastructure needed to support capital formation. Improved strategies are needed. We offer some. SoHo Loft Reed Smith 599 Lexington Avenue 22nd Floor New York, NY January 22-23, 2012 David Weild 212.542.9979 david.weild@cmapartners.com © Capital Markets Advisory Partners, LLC