Early boost in US IPOs lost by year-end
US IPOs benefited from an early boost that was maintained throughout most of 2018, but dramatically slowed then halted from November as a huge stock-market sell-off and volatility caused IPO applicants to postpone deals.
Overall, a total of 191 companies went public in the US in 2018, raising $46.8 bn – a rise from last year’s 160 IPOs and $35.5 bn of proceeds, according to data from Renaissance Capital.
But a closer look at the numbers reveals that IPOs rose 42 percent year-over-year during the first 10 months of the year, but that fell by 66 percent versus a year ago over the final two months.
‘The market volatility and market sell-off had a direct impact on the IPO market,’ says Matthew Kennedy, IPO market strategist at Renaissance in a statement. ‘It’s extremely difficult to price IPOs when markets are this volatile. Companies will just wait until next year.’
Breaking down the sectors, IPO activity was led by the healthcare sector, with 76 companies raising $9.1 bn. That was followed by technology, which saw 52 offerings raise $18.4 bn.
‘Market conditions heading into 2018 were good for biotechs,’ Kennedy observes, adding that pre-IPO funding rounds dating back to 2015 helped many biotech companies get ready to go public – especially in late 2017 when IPO investors made very strong gains in the pharma space.
The number of US domestic tech IPOs decreased however, but that was more than offset by Chinese tech companies going to market: who accounted for four of the 10 largest IPOs in the US this year.
‘If the strong market conditions in 2017 drove biotech issuers, weak market conditions in China drove Chinese companies to seek out the stable markets in the United States,’ Kennedy notes.
So far, the average performance of this year’s IPOs has been poor due to the stock market sell-off that began in late September/early October, according to Kennedy. Shares of companies that went public this year had averaged a 5 percent gain through to December 13, well below the five-year average of 20 percent.