US IPO activity was off to a blistering start during the first quarter of 2021 as 100 deals were priced – 300% higher than the level recorded during the 1st Qtr of 2020. During 1Q21 $39.2 bln in new cash was raised – 485% higher than the amount raised during the same period last year.
Robust March US IPO Activity
According to Renaissance Capital, 42 new deals were priced in March 2021 representing a 1300% surge over the 3 deals priced during the same month last year, and a 23.5% rise from the 34 deals that were priced in February. The number of new deals priced in March was higher than in any month over the past decade.
The volume of new capital raised in March 2021 totaled $17.3 bln, 1053% above the $1.5 bln raised during the same month last year, and 103.5% higher than the $8.5 bln raised in February. The number of new capital raised in March was higher than any month since September 2014 when $28.5 bln in new cash was raised.
Fifty-two (52) new IPOs were filed during March 2021, a 766% surge over the 6 deals that were filed during the same month last year, and a 44.4% increase over the 36 deals filed during February.
IPO performance posted weaker returns than the overall market during March. The Renaissance IPO Index plunged 14.7% during the month compared to an 11.0% drop in the S&P 500 Index during the same period.
Record 1Q 2021 IPO Activity
Throughout the 1st Qtr 2021, 100 new deals were priced, 300% above the 25 deals priced during the same period in 2020, and 37% above the 73 new deals priced in the 4th Qtr of 2020. The number of new deals priced in the 1Q20 was higher than has been recorded in any other quarter in more than a decade. Throughout the 1Q21, $39.2 bln in new capital was raised, a 485% higher than the $6.7 bln in new capital raised during 1Q20, and 40.5% above the $27.9 bln raised in the 4Q20.
During 1Q21 126 new deals were filed, 260% higher than the 35 new deals filed during 1Q20, and 61.5% above than the 78 new filings recorded during the previous quarter. During the first quarter of 2021, IPO activity as measured by the Renaissance U.S. IPO Index, fell 1.42%, underperforming the overall stock market as measured by the S&P 500, which rose 7.02% during the same period.
Our Take
US IPO activity was extremely strong during the first quarter of 2021, as measured by new deals priced, capital raised, and new filings. In fact, the only measure of IPO activity which showed any weakness during the first quarter was the IPO market, which underperformed the overall U.S. stock market.
We believe the robust performance seen in the US IPO market during the 1st Qtr, combined with rising interest rates, healthy trading commissions, and the pickup in US economic activity should boost earnings at most investment banks over the next few quarters. Despite this fact, we doubt that many investment banks will look to aggressively expand investment in their US research businesses any time soon as the buy-side limits payments for sell-side research.