Our loaded IPO calendar indicates that July could have the most IPOs in a single month in fourteen years, immediately after last quarter set a similar record. As many as 23 IPOs could price next week. Only one time since 2000 (in December 2004) has a week had 20 or more IPOs. During the tech bubble, there were two weeks in each of 1999 and 2000 that achieved that level of activity. However, even 17 would still be the most in a week since 2007.
IPOs next week include GE's Synchrony Financial (SYF), whose $3.1 billion planned offering could make it the largest IPO in two years. An idling tech sector should see the fast-growing and profitable Mobileye (MBLY) price next week. It and last week's TubeMogul should be the only sizable technology deals this month, as companies like Box, GoDaddy, Alibaba, Cnova and CyberArk will likely stay in the pipeline until after Labor Day. Next week will also feature three dividend-producing energy spinoffs, three LBOs, and twelve biotechs that could price.
The IPO market is all about timing, and this open IPO window has caused a flood of deals.
IPO performance has been strong. Since May 1, IPOs have had a 19% average return and 73% trade above issue. The Renaissance Capital IPO ETF, a measure of post-IPO performance, is up 9% since early May. On a granular level, the success of last week's early-stage Sage Therapeutics (SAGE, up 50%) likely encouraged this large round of biotechs.
Initial filings are up 75% over last year, creating a large backlog of companies waiting to go public. Companies are spurred to go public now while conditions are acceptable. No one knows when the next downturn will come, but concern over froth motivates IPO action as the S&P trades at all-time highs and the Fed Chair warns of stretched biotech valuations.
The biotech window remains open. The 38 biotechs in the first half of the year, many of them early-stage, require additional funding to make it through clinical trials. In addition, their venture capitalist backers seek out exit opportunities when available. July could see 19 biotechs in July, assuming investors have the appetite.
The IPO market largely shuts down during the annual late-August hiatus. This also explains why not a single company has entered the pipeline with an initial filing since last Monday. However, we expect filing activity to pick up again during the week of August 11 to set up post-Labor Day offerings.
IPO market snapshot
So far this year, 161 IPOs have raised $32.6 billion and produced an average first day return of 14%. The Renaissance IPO ETF (symbol: IPO), a float cap-weighted basket of newly public companies and indicator of post-IPO performance, has gained 3.0% compared with 7.6% for the S&P 500. Over the last 30 days, the IPO ETF has risen 0.1% compared with 2.0% for the S&P 500. The active IPO pipeline includes 131 companies looking to raise a total of $51 billion.
