Can IPO Issuance Exceed 200 Deals for 2015?
Year-to-date, 131 IPOs have raised $22 billion, 31% fewer offerings than last year but exactly in line with 2013, which ultimately saw 222 deals. Matching that level of activity now appears unrealistic due to the recent selloff in equities, a still-weak energy sector, uncertainty over US interest rates, trouble in emerging markets and high volatility heading into September. The VIX volatility index has reached levels not seen since September 2011, a month where no IPOs priced. However, 2011 had moderate IPO issuance in the fourth quarter even as the VIX ranged from 20 to 40. For the IPOs that come, returns should improve as investors demand greater valuation discounts. An uptick in August filings suggests that we could see 60-70+ IPOs through the rest of the year, but elevated volatility could drag the range down to about 30-40. Biotechs continue to represent a large share of IPOs; 60% of new IPO filings in August were from health care companies. The end of the year could also see as many as eight IPOs raise at least $1 billion, led by mega LBOs including First Data, Neiman Marcus and Univision, some of the last major holdovers from the 2005-2007 buyout binge. Soul Cycle and Pure Storage are among the few high-growth tech and consumer IPOs on file; these sectors remain wildcards in determining whether the IPO market reaches 200 offerings for the third year in a row, a streak last seen in 1998-2000.
IPO Market Snapshot
Strong IPO volume in the fourth quarter will in part hinge on improved returns for recent IPOs. The Renaissance IPO Index has traded down 6.6% year-to-date, compared to -4.3% for the S&P 500. As recently as June The S&P is down Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba ( BABA ), Hilton Worldwide ( HLT ) and Twitter ( TWTR ). In the past month, Alibaba and Twitter fell below their IPO prices for the first time. The Renaissance International IPO Index has traded down 3.0% year-to-date, compared to -5.9% for the ACWX. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Recruit Holdings and Cheil Industries. In May 2015, the US IPO Index was up 9% year-to-date and the International IPO Index was up 15%. To find out if this is the best ETF for you, visit our IPO Investing page .
The article Renaissance Capital's Fall 2015 US IPO Preview originally appeared on IPO investment manager Renaissance Capital's web site renaissancecapital.com.
Investment Disclosure: The information and opinions expressed herein were prepared by Renaissance Capital's research analysts and do not constitute an offer to buy or sell any security. Renaissance Capital, the Renaissance IPO ETF (symbol: IPO) or the Global IPO Fund (symbol: IPOSX) , may have investments in securities of companies mentioned.