2021 Likely to be a Record Year for IPOs: ETFs to Win

The global market for initial public offerings was off to a great start this year and is still running hot.There have been 446 IPOs priced this year, up 114.4% from last year, per renaissancecapital. Total proceeds raised are $158.0 billion, up 169.8% from last year. About 333 IPOs have been filed, marking an increase of 93.6% from last year.

There have been 480 SPAC IPOs this year, with healthcare taking about 38%total volume, followed by technology (31% weight). Companies are also joining the IPO stream to go public in a stock market at all-time highs.

For the year-to-date period, the market is already at a record level in terms of funds raised. This year through September companies have raised a total of $98.0 billion through the IPO process on U.S. exchanges. This includes foreign issuers of American Depository Receipts (ADRs), such as Didi,Oatly (OTLY) and Full Truck Alliance (YMM), as quoted on a Yahoo Finance article.

That $98.0 billion this year compares to $69.9 billion through September 2020. Last year saw a record $102.5 billion of equity raised — a number that should be crossed this year by the end of October. The fall IPO calendar looks strong, with a slew of heavy-weight companies, such as Rivian and InstaCart, waiting to hit the market.

What Lies Ahead?

It mostly depends on the bond yields. Demand for IPOs remains high, but if yields rise, it is possible that some of the huge valuations may be corrected. Still, “truly disruptive companies with a unique offering, particularly with a sustainable edge, are likely to find demand for their offering regardless of the wider market,” a Bloomberg article indicated early this year (read: Record Q1 for Global IPOs? ETFs in Focus).

On a positive note, the IPO market has now stepped into various other sectors apart from technology from where it has received the main traction.

Against this backdrop, investors can bet on the following ETFs.

Renaissance IPO ETF IPO

The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed IPOs of companies whose unseasoned equities are under-represented in core U.S. equity indices. Notably, IPOs that meet liquidity & operational screens are included on the index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% and removed after two years. The fund charges 60 bps in fees.

Renaissance International IPO ETF IPOS

The underlying Renaissance International IPO Index is a stock market index based on a portfolio of non-U.S.-listed newly public companies, prior to their inclusion in global core equity portfolios. The fund charges 80 bps in fees. China (44.8%), Japan (10.3%) and Canada (4.4%) are the top three geographies of the fund.

Defiance Next Gen SPAC Derived ETF SPAK

The underlying Indxx SPAC & NextGen IPO Index tracks the performance of the U.S.-listed common stock of Special Purpose Acquisitions Corporations and companies derived from it. The fund charges 45 bps in fees.

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Renaissance IPO ETF (IPO): ETF Research Reports

Renaissance International IPO ETF (IPOS): ETF Research Reports

Defiance Next Gen SPAC Derived ETF (SPAK): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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