According to global IPO investment advisor Renaissance Capital, only 18 IPOs were priced in the US during the 1st Qtr of 2019, the lowest number of IPOs seen in a 1st Qtr since 2016. The volume of capital raised totaled $4.7 bln during the period, 69.8% lower than the amount of new capital raised in the 1st Qtr of last year.
Weak 1st Qtr IPO Activity
According to Renaissance Capital, the number of new deals priced during the 1st Qtr of 2019 plunged 59.1% to 18 deals compared to the same period last year, marking the lowest number of new deals priced since the 1st Qtr of 2016 when a mere 8 IPOs were priced. The number of new deals priced during the 1st Qtr of 2019 represents a 48.6% drop from the 35 deals priced in the previous quarter.
The amount of new capital raised in the 1st Qtr of 2019 fell 69.8% to $4.7 bln when compared to the same period last year, marking the lowest 1st Qtr new capital total since the 1st Qtr of 2016 when $0.7 bln was raised. The new capital raised in the 1st Qtr of 2019 represents a 32.9% decrease over the capital raised in the previous quarter.
Healthcare companies made up two-thirds of all US IPOs that were priced during the 1st Qtr. Financial Services and Technology IPOs each represented 11% of the total number of IPOs priced during the period. The largest deals priced during the quarter included Lyft which raised $2.34 bln and Levi Strauss which raised $623 mln.
During the first quarter of 2019, 35 new IPOs were filed, an 18.6% decline from the number of new deals filed during the 1st Qtr of 2018. The number of filings in the 1st Qtr slipped 5.4% from the number of deals filed during the 4th Qtr of 2018.
The one piece of good news about IPOs is the fact that they outperformed the overall US stock market during the 1st Qtr of 2019. The Renaissance IPO Index rose 31.2% during the 1st quarter compared to a 13.1% gain in the S&P 500 Index during the same period.
The weak US IPO activity during the 1st Qtr of 2019 is not a surprise to most analysts as the US government shutdown that took place during January delayed many companies filing plans. The good news for the IPO market took place at the tail end of the quarter when Lyft’s IPO generated considerable investor interest. Many analysts believe that the remainder of 2019 should be a strong year for US IPOs as a number of marquee names are expected to come to market including Uber, Pinterest, Palantir, Slack and Rackspace.
The projected pickup in 2019 IPO activity following a weak first quarter should boost earnings at many investment banks. The big question is whether these gains can offset the weakness seen in research revenue at many investment banks caused by the implementation of MiFID II. However, we suspect that the strength in healthcare and technology IPOs could encourage some sell-side firms to continue hiring equity research analysts, particularly in these high-demand sectors.