US IPO Activity Picks Up in February 2020

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US IPO activity picked up in February 2020 as 13 deals were priced during the month, 30% higher than the number of new deals priced in the same month last year.  In addition, $3.0 bln in new cash was raised in February – 230% higher than the amount raised in February 2019.

Robust February US IPO Activity

According to Renaissance Capital, 13 new deals were priced in February 2020 representing a 30% rise from the 10 deals priced during the same month last year, and a 44% pickup from the 9 deals that were priced in January.  Over the first two months of this year 22 deals have been priced, 100% above the total seen during the same period of last year.

The volume of new capital raised in February 2020 totaled $3.0 bln, 233% above the $0.9 bln raised during the same month last year, and 36% above the $2.2 bln raised in January.  Over the first two months of this year, $5.2 bln in new capital has been raised, $350% over the $1.2 bln in new capital raised during the same period in 2019.

Of the 13 deals priced in February, 46% were from the healthcare sector totaling $2.46 bln in new capital raised, 15% of the deals were in consumer discretionary where $155 mln was raised, and 15% of the deals were in financials where $152 mln was raised, 15% were in technology where $67 mln was raised.  The remaining 8% of the deals priced in February were in the industrial sector where $200 mln was raised.

Seventeen (17) new IPOs were filed during February, a 183% rise over the 6 deals filed during the same month last year, and a 31% rise from the 13 deals filed during January 2020.  During the first two months of this year 30 new deals were filed, 88% higher than the 16 new deals filed during the same period last year.

Despite the weakness seen in the global equity markets over the past few weeks due to fears over the spread of the coronavirus, US IPO performance posted stronger returns than the overall market during February.  The Renaissance IPO Index dipped 3.2% during the month compared to an 8.4% drop in the S&P 500 Index during the same period.  Over the first two months of the year, IPOs rose 1.66%, outpacing the overall stock market as measured by the S&P 500, which fell 8.56% during the same period.

Our Take

It’s clear that US IPO activity during February posted strong results across the board, despite the swoon seen in the US and global stock markets brought on by fears over the spread of the coronavirus. 

Despite the strong performance seen in the US IPO market so far this year, we suspect the improving trend is not robust enough to overcome the weakness seen in trading commissions, and the drop in sell-side research revenue prompted by MiFID II.  Consequently, we doubt many investment banks or independent research firms will boost spending on their US research businesses any time soon – a factor that should keep a lid on 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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