Equity Capital Markets Overview

1
Equity Capital Markets Overview

• Jim Emslie
• Managing Director
• Banc of America Securities LLC
• Middle Market Investment Banking
• September 26, 2002

2
Industry Price Performance

• Varied picture between 2001 and 2002, except for
  Cyclicals, Retail and Consumer on the high end
  and Technology Telecom on the low end

INDEXED PRICE PERFORMANCE (1/1/01 TO 12/31/01)
Technology
Dow Jones
Consumer
MS Cyclical Index
NASDAQ
Telecom
SP 500
Retail
INDEXED PRICE PERFORMANCE 2002 YTD (1/1/02 TO
9/20/02)
Technology
Dow Jones
Consumer
NASDAQ
MS Cyclical Index
Telecom
SP 500
Retail
Source FactSet
3
New Issues IPOs

• Steady decrease in IPOs since early 2000

Dollars in billions Offerings
Source Equidesk
4
New Issues Follow-on Offerings

• Stronger volume in follow-ons. However, still
  tepid compared to prior years

Dollars in billions Offerings
Source Equidesk
5
IPO Pricing Relative to Marketing Range
Reason 1 for weak IPO market limited demand
Source FactSet
6
Aftermarket Performance of IPOs
Reason 2 for weak IPO market abysmal fund
manager IPO performance
Source FactSet as of 9/20/02
7
Aftermarket Performance of Follow-on Offerings
Reason 3 for weak IPO market fund managers
have been walloped by every class of public
equity security
Source FactSet as of 9/20/02
8
Domestic Equity Fund Flows
There has been a negative trend for domestic fund
flows over the last five months and cash
continues to exit out of equity funds
DOMESTIC EQUITY FUND FLOWS BY QUARTER
2001
Source AMG Data Services as of 9/20/02
9
IPO Market Available to Select Sectors
NUMBER OF 2002 YTD DEALS BY SECTOR
Source DealLogic 9/15/02. Excludes offerings
less than 20mm
10
IPO Market Limited to Large-Cap Issuers
Average IPO Size (MM)
Source Equidesk
11
Conclusions What is it going to take to revive
the IPO market?

• BAS Categories of Health
• the macro ECONOMY (B-)
• asset VALUATION (B)
• market LIQUIDITY (C-)
• investor SENTIMENT (A-)
• Key factors to revive the IPO market
• Stability in corporate earnings
• Pick-up in industrial capital spending
• No further erosion in consumer confidence
• World political stability
• Better performance in new follow-on equity
  issuances
• All of these factors should lead to positive
  equity funds flow, therefore, demand and
  liquidity for new issuance
• Andthe Chargers could win the Title in 2002

12
Implications for Todays Entrepreneurs

• Significantly lower valuations for Seed and
  Series A, B and C rounds
• Current must last longer
• Pressure to generate measurable results sooner
  (customers, revenues, milestones)
• Increasing (and longer term) reliance on private
  capital
• Need for back-up planning -- what if the public
  markets are in a slump in 3 to 5 years?
• Higher Bars Greater business maturity needed
  for an IPO