Following depressed US IPO activity during January, the number of IPOs priced rebounded to 10 deals in February, the highest monthly number of IPOs seen since last October when 22 deals were priced. The volume of capital raised in February totaled $900 mln, 47.1% lower than the amount of new capital raised during the same month last year.
Improved February 2019 US IPO Activity
According to Renaissance Capital, 10 new deals were priced in February representing a 9.1% drop from the 11 deals priced during the same month last year, but a surge from the single deal that was priced last month. February’s total number of priced IPOs also represents the highest monthly number of deals priced since October 2018 when 22 deals were priced. Despite the rebound seen in February, the number of new deals priced over the first two months of this year remains 60.7% below the total seen during the first two months of last year.
The amount of new capital raised in February slipped 4.7% to $900 mln when compared to the $1.7 bln raised during February of last year, although February’s total represented a 221% surge from January’s weak new capital total when only $280 mln was raised. Over the first two months of this year, $1.2 bln in new capital has been raised, a plunge of 89% from the $10.9 bln in new capital raised during the first two months of 2018.
Of the eleven deals priced during the first two months of this year, nine deals were from the healthcare sector totaling $869 mln in new capital raised. IN addition, one deal priced during the first two months of the year was from the energy sector ($280 mln raised) and one deal was from the technology sector ($25 mln raised).
Seven (7) new IPOs were filed during February, a 36.4% drop over the 11 deals filed during the same month last year. During the first two months of this year 19 new deals were filed, 13.6% lower than the 22 new deals filed during the same period last year.
IPO performance posted much stronger returns than the overall market during February. The Renaissance IPO Index rose 9.97% during the month compared to a 2.97% gain in the S&P 500 Index during the same period. Over the first two months of the year, IPOs rose 27.95%, greatly outpacing the overall stock market as measured by the S&P 500, which rose 10.84% during the same period.
The rebound seen in US IPO activity during January is not terribly surprising given the fact that the US government was shuttered for most of January. However, the gains seen in February did not compensate for January’s weakness as most IPO statistics for the first two months of the year remained below those seen during the first two months of 2018. What is also concerning is the fact that new filings over the past four months remain depressed – a factor that could limit IPO activity in the coming months.
Even if IPO activity does strengthen in the coming months, we are not convinced this will translate into a meaningful rise in sell-side analyst hiring at many banks. This is due, in large part, to the decline in research payments caused by MiFID II. It will be important to see if a large number of US asset managers decide to pay for their external research providers from their own pockets versus using commissions as such a move is likely to depress overall research budgets, thereby restrict research hiring.