US IPO activity surged in January, 2021 as 38 deals were priced during the month, 192% higher than the number of deals priced during the same month of last year. During January $13.4 bln in new cash was raised – 509% higher than the $2.2 bln raised during the same month of 2020.
Unusually Strong January 2021 US IPO Activity
According to Renaissance Capital, 38 new deals were priced in January 2021 representing a 192% jump from the 13 deals priced during the same month last year, and an 11.1% dip from the 27 deals that were priced in December. The January 2021 level of IPOs priced is considerably higher than the level seen in January in at least the past twelve years.
The volume of new capital raised in January 2021 totaled $13.4 bln, 509% above the $2.2 bln raised during the same month last year, and 8.1% higher than the $12.4 bln raised in December of 2020. The January new cash total was the highest amount of cash raised in a single month in the US IPO market since May 2019 when $15 bln was raised.
Six of the twenty-four deals priced during January (25%) came from the Technology sector where $4.2 bln was raised; four of the new deals priced during the month (16.7%) were from the financial sector where $2.1 bln was raised; three deals (12.5%) was from the healthcare sector where $1.8 bln was raised; three deals (12.5%) was from the industrials sector which raised $2.2 bln; three deals (12.5%) was from the materials sector which raised $69 mln; two deals (8.3%) came from the consumer discretionary sector which raised $1.6 bln; one deal (4.2%) came from the consumer staples sector which raised $1.4 bln; one deal (4.2%) came from the real estate sector where $125 mln was raised, and the final deal (4.2%) came from the energy sector which raised 26 mln.
Thirty-eight (38) new IPOs were filed during January, a 192% surge over the 13 deals filed during the same month last year, and a 90% rise from the 20 deals filed during December. The number of new deals filed in January was the second highest monthly level of new deals filed since June 2015. Forty-two new deals were filed in September of 2020.
IPO performance posted considerably stronger returns than the overall market during January, 2021. The Renaissance IPO Index rose 5.6% during the month compared to a 1.1% drop in the S&P 500 Index during the same period.
Our Take
US IPO activity finished the second half of 2020 on a strong note, after experiencing weakness during the first half of the year due to seasonal pressures and the COVID-19 pandemic in the spring. The strength seen in the second half of 2020 continued into 2021 with unseasonably strong January statistics. In fact, the robust number of new deals filed over the past five months suggests that IPO activity could remain strong through mid-year. This should bode well for earnings at many investment banks.
Despite the strength in US IPO activity in recent months, and the strong level of buy-side engagement with sell-side research that took place in 2020, we are not convinced that many investment banks will look to expand their research teams in the coming months. This is due, in large part, to asset managers’ unwillingness to boost what they pay their external research providers – a development resulting from fixed research budgets which were implemented by many firms in the wake of MiFID II.