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Equity Capital Markets Overview

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					Equity Capital Markets Overview

Jim Emslie
Managing Director
Banc of America Securities LLC
Middle Market Investment Banking

September 26, 2002
61313 2/15/2010 2:03:29 AM




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)
  10.0%                                                                                      2.0%        4.0%
    0.0%

(10.0% )
                                                                     (8.3%)     (7.1%)
(20.0% )                                        (13.0%)   (12.9%)
(30.0% )                (26.0%)    (21.1%)
                      Technology    NASDAQ      S&P 500   Telecom    Consumer Dow Jones      Retail MS Cyclical
                                                                                                         Index



INDEXED PRICE PERFORMANCE — 2002 YTD (1/1/02 TO 9/20/02)
     0.0%

(15.0% )                                                                                                (4.4%)
(30.0% )                                                             (20.6%)    (20.3%)    (18.5%)
                                                          (26.4%)
(45.0% )                                        (37.4%)
                         (44.9%)   (44.9%)
(60.0% )
                         Telecom   Technology   NASDAQ     S&P 500   Consumer   Dow Jones MS Cyclical     Retail
                                                                                            Index


Source: FactSet
      61313 2/15/2010 2:03:29 AM




     New Issues – IPOs

              Steady decrease in IPOs since early 2000

      Dollars in billions                                                    Offerings

      $80                                                                        400
                                   $70.9
                                                                                 350
                                   370
          60                                                                     300
                                                                                 250
                                           $39.0
          40                                                                     200
                                                                                 150
                                                         $20.3
          20                                 79                                  100
                                                           53           $10.0
                                                                           53    50
              0                                                                  0
                                   2000    2001        2002YTD         Backlog
                                                   Volume      Deals

Source: Equidesk
  61313 2/15/2010 2:03:29 AM




 New Issues – Follow-on Offerings
          Stronger volume in follow-ons. However, still tepid compared to
           prior years

  Dollars in billions                                                        Offerings

  $140                                                                          450
                                 $115.9
                                            382                                 400
      120                      400
                                                                                350
      100
                                          $80.1                                 300
                                                          281
         80                                                                     250
                                                       $55.4
         60                                                                     200
                                                                                150
         40
                                                                                100
         20                                                           $3.0      50
                                                                     24
             0                                                                  0
                                2000      2001        2002YTD        Backlog
                                                  Volume     Deals
Source: Equidesk
61313 2/15/2010 2:03:29 AM




IPO Pricing Relative to Marketing Range


Reason #1 for weak IPO market – limited demand


 100%
     80%
     60%
     40%
     20%
         0%
                                           2002 YTD


                                                      Oct
                             2000
                                    2001




                                                                  Dec
                                                            Nov




                                                                                          Apr
                                                                        Jan
                                                                              Feb




                                                                                                      Jun




                                                                                                                        Sep
                                                                                                            Jul
                                                                                                                  Aug
                                                                                    Mar


                                                                                                May
                                                            Below         Within          Above



Source: FactSet
61313 2/15/2010 2:03:29 AM




Aftermarket Performance of IPOs

Reason #2 for weak IPO market – abysmal fund manager IPO
performance

   40.0%

   20.0%

      0.0%
                                                   (1.5%)
(20.0%)                                   (7.7%)

(40.0%)

(60.0%)
                                (62.0%)
(80.0%)
                                2000      2001     2002
                                                   YTD



Source: FactSet as of 9/20/02
61313 2/15/2010 2:03:29 AM




Aftermarket Performance of Follow-on Offerings

Reason #3 for weak IPO market – fund managers have been walloped
by every class of public equity security


  10.0%


(10.0%)
                                                 (18.6%)
(30.0%)                                (21.0%)


(50.0%)

                             (59.9%)
(70.0%)
                                2000   2001      2002
                                                 YTD



Source: FactSet as of 9/20/02
61313 2/15/2010 2:03:29 AM




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


   $60                                                            $53.2
                                     $41.7
   $40
                             $14.2                        $15.1
   $20
                                                                          $2.9
       $0
 ($20)                                          ($13.7)
 ($40)
                                                                                 ($40.3)
 ($60)
                             1Q01    2Q01       3Q01      4Q01    1Q02    2Q02   3Q02
                                                                                 YTD
                                             2001

Source: AMG Data Services; as of 9/20/02
61313 2/15/2010 2:03:29 AM




IPO Market Available to Select Sectors

             NUMBER OF 2002 YTD DEALS BY SECTOR

                               Real Estate
                                   6%      Finance
                                              9%                 Industrial
                             Media &
                                                                    13%
                             Telecom
                               2%

                             Energy
                               2%                                     Technology
                                                                         19%

                               Healthcare
                                  25%                            Consumer
                                                                   24%

Source: DealLogic; 9/15/02. Excludes offerings less than $20mm
  61313 2/15/2010 2:03:29 AM




 IPO Market Limited to Large-Cap Issuers

  Average IPO Size ($MM)

       $600

           500
                                        $493.2

                                                 $390.2
           400

           300
                               $191.6
           200

           100

                   0
                                2000     2001    2002YTD


Source: Equidesk
61313 2/15/2010 2:03:29 AM



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

 And…the Chargers could win the Title in 2002
    61313 2/15/2010 2:03:29 AM




    Implications for Today’s 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

				
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