IPO activity is still muted heading into the final stretch of 2022, weighed down by poor trading from new issuers. Despite challenging current market conditions, the energy and healthcare sectors have delivered solid trading recently, and are the only two averaging positive returns for the year.
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Excluding SPACs, the healthcare sector has been the most active for new issuance, producing 20 IPOs so far this year that average an 10% return from offer. Half of the deals raised $50 million or more, and biotechs have been the main driver of activity.
While healthcare is a defensive sector, biotechs are exposed to their own idiosyncratic risks. Trading has been mixed for both the larger and the smaller healthcare deals, though the larger deals have fared better overall. The group of $50+ million IPOs average a strong 24% return, and seven (70%) are trading above issue, led by later-stage biotechs CinCor Pharma (CINC) and Amylyx Pharmaceuticals (AMLX).
The energy sector has produced two large IPOs, LNG infrastructure operator Excelerate Energy (EE) and fracking services provider ProFrac Holding (PFHC). Both currently trade above issue, averaging an 11% return from offer. While oil and gas stocks often take a hit during a recession, the two energy stocks have averaged a 26% gain over the last month due to OPEC+'s decision to cut oil production, and the ongoing war in Ukraine.
