US IPO activity continued remained strong in July as 29 deals were priced during the month, 38% higher than the number of deals priced during the same month of last year. During July $7.3 bln in new cash was raised – 52% higher than the $4.8 bln raised during July of 2019.
Strong July US IPO Activity
According to Renaissance Capital, 29 new deals were priced in July 2020 representing a 38% increase from the 21 deals priced during the same month last year, and no change from the 29 deals that were priced in June. The number of new deals priced on a year-to-date basis totaled 93 deals – 7.9% below the total seen during the same 7 month period in 2019.
The volume of new capital raised in July 2020 totaled $7.3 bln, 52% above the $4.8 bln raised during the same month last year, though 44% lower than the $13.1 bln raised in June. So far in 2020, $29.1 bln in new cash has been raised in the US IPO market, 15.8% below the $34.6 bln raised during the first seven months of last year.
Fourteen of the twenty-nine IPOs (48%) priced during July came from the healthcare sector and raised $2.80 bln; five of the new deals priced in July (17%) were from the technology sector and raised $1.22 bln; four deals (13.8%) were from the consumer discretionary sector and raised $1.67 bln; three deals (10.3%) were from the financials sector which raised $1.39 bln; two deals (6.9%) were from the industrials sector and raised $183 mln; and the remaining deal priced in July came from the real estate sector which raised $34 mln.
Thirty (30) new IPOs were filed during July, a 76% surge over the 17 deals filed during the same month last year, and a 7.1% rise from the 28 deals filed during June. During the first 7 months of the year, 119 new IPOs have been filed, 7.0% lower than the 128 IPOs filed during the same period last year.
IPO performance posted stronger returns than the overall market during July. The Renaissance IPO Index rose 9.7% during the month compared to a 5.5% gain in the S&P 500 Index during the same period.
Our Take
After rebounding in June, US IPO activity remained strong in July 2020. This two month rebound follows weak IPO performance during the first five months of 2020 as the opening of many state economies enabled companies to finally launch IPOs delayed by the COVID-19 pandemic. Deals priced, new cash raised, and new filings all posted strong results during July, though year-to-date statistics remain under water when compared to the same period of last year. In addition, the IPO market remained strong during July as it outperformed the overall stock market by a large margin.
The weak performance seen in the US IPO market over the first half of this year, combined with near zero interest rates, and the fact that many banks have had to increase their loan loss reserves as a result of the shutdown of many US businesses during the lockdown, should depress earnings at many investment banks over the foreseeable future.
Despite these negative factors for bank earnings, buy-side engagement with sell-side research remains extremely strong due to the economic uncertainty created by the COVID-19 pandemic. The real question is whether increased buy-side demand for sell-side research will lead to a meaningful increase in the amount paid for sell-side research. If it does, we suspect some investment banks will respond by slowly expanding their research teams in the coming months. If not, we suspect sell-side research hiring will remain stagnant.