US IPO activity recorded historic results for 2021 reflecting a robust rebound following pandemic related closures in 2020. During 2021, 397 deals were priced, 80% higher than the number of new deals priced in 2020. Also during the year $142.4 bln in new cash was raised – 82% higher than the amount raised during the prior year.
Weak IPO Activity in December
According to Renaissance Capital, 9 new deals were priced in December 2021 representing a 66.7% plunge from the 27 deals priced during the same month last year, and a 73.5% drop from the 34 deals that were priced in November of 2021. The volume of new capital raised in December totaled $4.8 bln, 61% below the $12.4 bln raised during the same month last year, and 73% below the $17.6 bln raised in November.
Of the 9 deals priced in December, 3 deals (33%) were from the healthcare sector totaling $77 mln in new capital raised; 2 of the deals (22%) were in financials where $2.7 bln was raised; 2 of the deals (22%) of the deals were in technology where $2.0 bln was raised; 1 deal (11%) was in consumer staples where $22 mln was raised; and 1 deal (11%) were in the industrials sector where $15 mln was raised.
Fifteen (15) new IPOs were filed during December, a 25% drop from the 20 deals filed during the same month last year, and a 50% drop from the 30 deals filed during November 2021.
IPO performance posted weaker returns than the overall market during December 2021. The Renaissance IPO Index plunged 8.2% during the month compared to a 4.4% rise in the S&P 500 Index during the same period.
Robust 2021 IPO Activity
Throughout 2021, 397 new deals were priced, 80% above the total seen during 2020, and 145% above the total number of deals priced in 2019. Throughout 2021, $142.4 bln in new capital was raised, an 82.1% surge over the $78.2 bln in new capital raised during 2020. The total number of new deals priced during 2021 was higher than any annual total since 2000 and the biggest year for IPO proceeds raised ever recorded.
During 2021 499 new deals were filed, 88.3% higher than the 265 new deals filed during 2020. In fact, the total number of new filings recorded during 2021 was above the 10-year average level of new filings level of 226.
Over 2021, IPOs as measured by the Renaissance U.S. IPO Index, dropped 11%, largely underperforming the overall stock market as measured by the S&P 500, which rose 25% during the same period.
Our Take
Although US IPO activity in December 2021 was extremely weak, overall IPO activity for the year was extremely robust as most states remained open despite the Delta and Omnicron Covid-19 variants. While many of the annual IPO series remained considerably above the levels seen in previous few years, the weakness of IPOs in the aftermarket suggests that IPO investors are likely to remain cautious in 2022.
We believe that the strong performance seen in US IPOs in 2021, combined with a rise in US equity commissions during the year, should boost earnings at most investment banks over the next few quarters. Despite these factors, many asset managers will continue to limit their spending on sell-side and independent equity research. 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.