US IPO Market Posts Strong Results in 1st Qtr of 2018

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According to global IPO investment advisor Renaissance Capital, 44 IPOs were priced in the US during the 1st Qtr of 2018, while the volume of capital raised surged to $15.5 bln during the period, significantly higher than the amount of new capital raised in the 1st Qtr over the past few years.

Strong 1st Qtr IPO Activity

According to Renaissance Capital, the number of new deals that were priced during the 1st Qtr of 2018 surged 76% to 44 deals when compared to the same period last year, and represents an 18.5% dip in new deals from the 4th Qtr of 2017.  The 1st Qtr 2018 results marks the highest number of IPOs during any 1st Qtr since 2014 when 64 IPOs were priced.

The amount of new capital raised in the 1st Qtr of 2018 rose 57.4% to $15.5 bln when compared to the same period last year, marking the highest quarterly new capital total since the 4th Qtr of 2014 when $16.2 bln was raised.  1st Qtr results were driven primarily by four billion-dollar IPOs.  The new capital raised in the 1st Qtr of 2018 represents a 42.2% increase over the capital raised in the previous quarter.

During the 1st Qtr, almost one-third of the IPOs came from the healthcare sector with 14 deals being priced.  The technology sector was the next most active with 10 deals priced in that sector.

Through the first three months of this year, 44 new IPOs have been filed, 15.8% higher than what was recorded during the same period last year.

IPOs continued to outperform the overall market during the 1st Qtr.  The Renaissance IPO Index rose 2.17% during the 1st quarter and 25.45% over the past twelve months, compared to a 2.11% drop in the S&P 500 Index during the 1st Qtr and a 12.66% gain for the past twelve months.

Our Take

Strong US IPO activity during the 1st Qtr of 2018 is not a surprise to most analysts as increased confidence in the U.S. economy; positive performance from IPOs; the pro-business climate of the current administration; and, continued low interest rates have all been encouraging signs to corporate executives.  Consequently, many analysts expect the strong 1st Qtr IPO performance should continue throughout the remainder of 2018.

The projected pickup in 2018 IPO activity should be a boost to earnings at many investment banks.  The big question is whether this renewed IPO activity will be able to offset the weakness seen in equity trading commissions and research revenue at many banks caused by the onset of MiFID II.  However, we suspect that the strength in healthcare and technology IPOs could encourage some sell-side firms to boost hiring research analysts, particularly in these high-demand sectors.

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About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email: Michael.Mayhew@integrity-research.com

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