- The initial public offering market saw its best activity in four years by deal volume and its best showing in nearly five years by capital raised.
- Technology, communication services and health care companies comprised the majority of new issues during the second quarter, creating an attractive source of new ideas for investors.
- Solid equity market gains and the torrent of 2Q activity suggest 2019 is shaping up to be an excellent year for the IPO market.
Strong Biotech Debuts End 2Q on High Note
The new issue market surged in the second quarter, providing investors with a range of new companies to consider. During the quarter, 63 initial public offerings (IPOs) raised $25.3 billion, the most active quarter by deal count in four years and the most capital raised in nearly five years.
Helped by Uber’s $8.1 billion IPO, quarterly proceeds made 2Q 2019 the biggest second quarter since 2000, according to Renaissance Capital. While Uber, the year’s most highly-anticipated IPO, stumbled on its public debut before recovering, the quarter’s average return was 30%. This strong showing was driven by tech and tech-related companies, including high-profile names like Pinterest, Chewy, Zoom Video as well as a direct listing for Slack. Plant-based foods maker Beyond Meat was the best performer, soaring 542% above its offer price as investors sought out innovative growth stocks.
A stretch of IPOs surging in their debuts grew more dramatic on June 27, with a pair of record-breaking pops from the health care sector that included the best start for any 2019 IPO. First, BridgeBio Pharma opened 80% above its IPO price, the biggest opening gain by any biotechnology or pharmaceutical IPO this year. It dethroned Stoke Therapeutics, which opened 51% above its IPO price the prior week. Six minutes after BridgeBio started trading, Adaptive Biotechnologies opened even higher. Shares traded at nearly double their IPO price, surpassing CrowdStrike Holdings to become the year’s biggest pop from any sector.
Exhibit 1: U.S. IPO Activity By Deal Volume and Capital Raised
The information technology (IT), communication services and health care sectors made up two-thirds of all activity, continuing a multi-year trend. New issues have steadily rebounded from a recent trough in 2016 (Exhibit 1). The year-to-date recovery in public markets and the torrent of activity in the second quarter suggests that 2019 is shaping up to be an excellent year for the IPO market.