As the second half of the year gets underway, the IPO market is expected to maintain momentum in July and August as investors show a high degree of confidence in the markets, according to Nelson Griggs, president of the Nasdaq Stock Exchange.
Even as coronavirus cases surge across the U.S., markets continue to rally and IPOs are moving forward as companies seek the public markets ahead of the U.S. Presidential election. The expectation for a strong IPO market this summer builds off the activity in May and June. During the first six months of the year, Nasdaq welcomed 69 IPOs. Notably, Nasdaq dominated healthcare IPOs with 35 in the first half, including Royalty Pharma (RPRX), which was the largest IPO based on proceeds raised.
“We saw healthcare IPOs get out, and what that established was a process to do these IPOs,” Griggs said during a recent interview on CNBC. “We had a good pipeline heading into the pandemic. Once the process was ironed out, from testing the waters as well as a virtual roadshow, we saw some amazing deals, including Warner Music, ZoomInfo, Vroom, and they have done exceptionally well.”
To date, the Nasdaq Composite has gained almost 17%, outperforming the S&P 500 and the Dow Jones Industrial Average. The recent performance of biotech has also been a bright spot in the market, and, as of July 2, every biotechnology and pharmaceutical company that has gone public had priced within or above range, according to Jordan Saxe, Nasdaq’s head of healthcare IPO listings.
“Year-to-date, the median biopharma IPO performance for the first day is 28% above IPO price. In the first 30 days post-IPO, it’s 39%,” Saxe said recently.
Saxe revised his target upward to a range of 45 to 50 biotech listings, raising about $9 billion, by the end of 2020.
As companies prepare for an IPO, they are finding that the switch from in-person to virtual roadshows has worked out well, reaching a broader investor base in a less time-consuming manner, Griggs said. To accommodate these IPOs, Nasdaq has adjusted to a social-distancing environment with remote first trades and virtual bell ceremonies.
“One of the biggest things that has come up is that a lot of IPOs will be scheduled to price on a Wednesday or Thursday, and we will get a call the week before, saying, ‘We’re going to move it up a day, maybe even two,’ because the demand is already there,” Griggs said.