A strong stock market, coupled with the success of recent IPOs, has fueled a healthy IPO market for 2017 so far, with the finance, biotech and pharmaceuticals, and energy sectors being particularly active. There remains a significant backlog of IPOs representing a broad range of industries that were prepared for but not executed last year due to market volatility and uncertainty surrounding the US presidential election and Brexit. These IPOs are expected to come to market in the balance of the year.

While the robust pipeline for IPOs includes a cross-section of sectors, we anticipate that the life sciences, consumer retail, technology, and industrials sectors are poised to perform well. If the economy continues to strengthen and consumer demand for discretionary purchases rises, we could see an uptick in IPOs in related sectors, particularly restaurants and fast-casual chains. This year was expected to be a banner one for technology companies, although it is not currently clear whether that will come to pass.

The strong performance of energy offerings has been especially noteworthy. Oilfield services companies have dominated the energy IPO market, with a surge in offerings in that sector unlike anything we have seen in over a decade. As oil prices have dropped, however, some of these offerings have priced below their targets and traded down from there. The recent softness in the market may be overcome by a strong OPEC commitment to curtailing production and other macro factors that are unpredictable. Additionally, to state the obvious, we are experiencing an unprecedented period of politics-based market volatility.

Another trend to monitor is the steady stream of sponsor-backed equity deals. Because the IPO market is generally strong while the M&A markets are somewhat overheated in many sectors, naturally there are more private equity firms turning to IPOs as an exit route. More so than in the previous few years, we are also seeing more companies running a dual-track IPO/M&A process to provide greater flexibility, hedge against market volatility, and possibly negotiate a higher sale price.

Despite a rebounding and robust IPO market, many companies are choosing to stay private longer due to the increased availability of private capital and more flexible securities laws, such as the JOBS Act and Reg A+, which allow these companies to have more shareholders and options for private trading, while avoiding the burden of additional regulation. In particular, we have seen hot technology companies (so-called "unicorns") reach impressive scale without having to tap the public markets.

While there are some instances of companies utilizing Regulation A, its use has not been widespread. The key impediment is cost. While the requirements of Regulation A offerings are somewhat less onerous than public offerings, the differences are not so great as to make the overall cost worthwhile to issuers, particularly compared to public offerings.

Moreover, investors are far more comfortable with the traditional public offering process. As a result, for issuers seeking capital, the decision is typically a choice between the far less costly private offering and a traditional IPO, where issuers can make their "big splash."

Accordingly, Regulation A is of greater use to niche issuers that wish to avoid the full range of obligations to which public companies are subject, while accessing capital beyond the private market.

Traditionally, only a small minority of IPO issuers used a dual-class share structure. The sale of non-voting dual-class stock in the Snap Inc. IPO earlier this year, however, certainly has issuers focusing on the topic again. We are getting questions about dual-class share structures, non-voting share classes, and other ways for founders to maintain control after an IPO, such as the voting agreements Mark Zuckerberg received from pre-IPO investors in Facebook, Inc.

The Snap Inc. IPO has also angered institutional investors, who unsuccessfully petitioned Snap Inc. to abandon its non-voting dual-class stock plans before the IPO. Many institutional investors have been publicly critical of Snap Inc.'s capital stock structure, and representatives from the Council for Institutional Investors and other investor groups recently appealed to the SEC to work with US stock exchanges to ban dual-class listed companies. Whether a ban is instituted or private ordering continues, and whether there will be an increase in dual-class listed stock, remain to be seen.

Comments on an issuer's financial disclosure (its financial statements and the related MD&A section) continue to predominate in the SEC comment letters we are seeing. These comments include posing technical accounting questions, probing the issuer's MD&A explanations for year-over-year differences in the issuer's financial results, and asking about known trends in the issuer's business.

The SEC is also pressing issuers to provide more information about "key metrics" the issuer is disclosing in the MD&A section. Key metrics are operational and financial metrics, such as the number of customers or revenue retention rates an issuer provides in addition to traditional financial statement line items, such as revenue and expenses. More recently, the SEC is asking issuers to provide explanations for increases and decreases in key metrics, as they would for traditional financial statement line items. We have also seen the SEC continue to ask questions about and push issuers for substantiation of other key marketing disclosure, such as an issuer's total addressable market (TAM) or market share.

One area in which we are seeing fewer SEC comments is "cheap stock." Several years ago, the SEC issued accounting guidance indicating that issuers did not need to provide as much cheap stock disclosure in their MD&A. Since then, we have seen the SEC issue one or two cheap stock comments to an issuer, rather than five or more comments, which was common previously.

Overall, the number of comments received by issuers in IPOs is decreasing. A recent study indicates that the number of first-round comments given to issuers has decreased by as much as 40% in recent years. While the number of comments may be dropping, the SEC remains focused on key points an investor would find significant, such as financial information, key metrics, and marketing points.

Companies today are taking two and sometimes three times as long to go public as they did during the heady dot-com days. A number of factors seem to be influencing this trend.

In 2010, the JOBS Act increased the SEC's statutory threshold for the number of securityholders above which an issuer is required to have to go public. As a result, private companies are now able to have many more shareholders without going public than they previously could.

Additionally, founders and institutional pre-IPO investors such as venture capitalists seem to be more comfortable waiting longer for a return on their investment than they previously were. This patience is attributable to investors' confidence that the value of their investment might increase more substantially and quickly away from the scrutiny of Wall Street.

As the market for secondary trading of private company stock has increased, it has also become easier for employees to receive pre-IPO liquidity and for institutional investors to acquire additional ownership without diluting other investors. This has alleviated some pressure on management teams to take a company public sooner than they wish. We anticipate that these trends will not change any time soon, and so we may need to come up with a better name than the mythical "unicorn" for a pre-IPO company with at least a billion-dollar valuation, because these companies are becoming more common.