Strong 2020 U.S. IPO Activity

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US IPO activity recorded strong results for 2020 reflecting a robust rebound following widespread pandemic related closures in the first half of the year.  During 2020, 218 deals were priced, 36% higher than the number of new deals priced in 2019.  Also during the year $78.2 bln in new cash was raised – 69% higher than the amount raised during the prior year.

Strong Rebound in December

According to Renaissance Capital, 27 new deals were priced in December 2020 representing a 238% surge from the 8 deals priced during the same month last year, and a 170% jump from the 10 deals that were priced in November of 2020.  The volume of new capital raised in December totaled $12.4 bln, 343% above the $2.8 bln raised during the same month last year, and 153% above the $4.9 bln raised in November. 

Of the 27 deals priced in December, 12 deals (44%) were from the healthcare sector totaling $1.95 bln in new capital raised; 9 of the deals (33%) were in technology where $9.59 bln was raised; 2 of the deals (7.4%) of the deals were in financials where $310 mln was raised; 2 deals (7.4%) were in consumer discretionary where $300 mln was raised; 1 deal (3.7%) were in industrials where $173 mln was raised, and the remaining 3.7% of the deals priced in December were in the communications services sector where $30 mln was raised.

Twenty (20) new IPOs were filed during December, a 67% rise over the 12 deals filed during the same month last year, and a 23% drop from the 26 deals filed during November. 

IPO performance posted weaker returns than the overall market during December 2020.  The Renaissance IPO Index rose a meager 0.2% during the month compared to a 3.7% rise in the S&P 500 Index during the same period.

Robust 2020 IPO Activity

Throughout the year, 218 new deals were priced, 36.3% above the total seen during 2019, and 13.5% above the total number of deals priced in 2018.  In fact, the total number of new deals priced during 2020 was stronger than any annual total seen since 2014 when 275 new deals were priced.  Throughout 2020, $78.2 bln in new capital was raised, a 68.9% surge over the $46.3 bln in new capital raised during 2019.

During 2020 261 new deals were filed, 25.5% higher than the 208 new deals filed during 2019.  In fact, the total number of new filings recorded during 2020 was higher than any year since 2014 when 364 new filings were listed.

Over 2020, IPOs as measured by the Renaissance U.S. IPO Index, rose 114.9%, outpacing the overall stock market as measured by the S&P 500, which rose 15.9% during the same period.

Our Take

Despite the weak performance in US IPO activity during the 1st and 2nd quarters of 2020, IPO activity rebounded and posted strong gains in the second half of the year as most states opened up their economies following pandemic mandated lockdowns.  As a result, by the end of the year every annual IPO series exceeded levels seen in the previous few years. 

We believe that the strong performance seen in the US IPO market in 2020, combined with a rise in trading commissions during the first half of the year will act to boost earnings at most investment banks over the next few quarters.  Despite these factors, MiFID II budgets will cause many asset managers to limit their spending on sell-side equity research, even though their use of sell-side research rose strongly during the year.  Consequently, we doubt many investment banks will be increasing their investment in their US research businesses any time soon – a factor that should restrain research department hiring over the near term.

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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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