A Halftime Report Of The IPO Market In 2019

After a sluggish start to the year, IPO activity picked up momentum in the second quarter both in terms of the number and value of deals. The U.S. government shutdown that lasted for 34 days through Jan. 25 was partly to be blamed for the first quarter slackness.

A Searing Second Quarter

The number of IPOs in the first quarter of 2019 totaled 12, smaller than 44 in 2018 and 25 in 2017, according to data compiled by Renaissance Capital.

Buoyed by a flurry of deals, the second quarter saw 62 companies going public, higher than the 60 issues in 2018 and 52 issues in 2017.

In terms of deal count, the second-quarter performance was the best in four years.

Value-wise, the second quarter raked in proceeds of $25 billion, and this coupled with the $4.7 million raised in the first quarter, brings up the total IPO proceeds for the half year to $29.7 billion. This compares to the $28.6 billion raised in 2018 and the $20.5 billion in 2017.

The Renaissance IPO ETF IPO is higher by 31% in 2019.

Robust Returns

Not only were the deal count and deal size large, but IPO returns were also robust. The average return from the U.S. IPOs was 11.5% in the first quarter, increasing to 30.5% in the second quarter, with much of the gain contributed by plant-based meat manufacturer Beyond Meat Inc BYND.

Even excluding the returns from Beyond Meat, IPO returns for the second quarter would have been a solid 21.2%, according to Renaissance.

Among the sectors, health care and techs dominated the IPO market. Specifically, in the second quarter, 18 biotechs and 20 tech stocks debuted.

Not A Smooth Ride For Uber

The much-waited IPO of ride-hailing company Uber Technologies Inc UBER turned out to be a disappointment. Although taking the top spot in terms of deal size ($8.1 billion), since its debut, Uber shares have returned a mere 0.3%.

Among the other large-sized IPOs of the quarter were Avantor Inc AVTR, Pinterest Inc PINS, Tradeweb Markets Inc TW and Chewy Inc CHWY.

Uber rival Lyft Inc LYFT, which IPOed in the first quarter, raised $2.34 billion.

Barring Uber and Lyft, most of these big-sized IPOs have generated strong returns thus far.

Slack Goes Unconventional

Slack Technologies Inc WORK, a cloud-based provider of team collaboration tools and online services, opted for an unconventional direct listing. In a direct listing, companies do not issue shares or raise capital, and consequently there is no share dilution and lock up restrictions to adhere to. The stock has generated negative returns since it listed June 20.

Here are the top gainers and losers among the companies that debuted this year (performance calculated using the closing price of June 27):

Winners

Beyond Meat: +551.6%
Shockwave Medical Inc SWAV: +224%
Zoom Video Communications Inc ZM: +150.8%
Cortexyme Inc CRTX: +134.1%
Silk Road Medical Inc SILK: +132.6%

Losers

Ruhnn Holding Ltd – ADR RUHN: (-74.5%)
Anchiano ADR ANCN: (-61.4%)
Axcella Health Inc AXLA: (-54.4%)
Hookipa Pharma Inc HOOK: (-53.6%)
Greenlane Holdings Inc GNLN: (-41.5%)

Meaty Showing

After opening at $46 on its debut on Nasdaq May 2 compared to the IPO price of $25, Beyond Meat stock closed the session with a whopping gain of 167%.

The stock has advanced strongly since then, with the rally gaining further momentum following the release of the company's financial results June 6.

What To Look For In The Second Half

The IPO momentum will seep down into the third quarter, Renaissance says, citing the strong returns and the large backlog of growth companies: "The IPO market's current momentum suggests that 2019 is on track for 160 – 200 IPOs raising more than $50 billion."

Here are some IPOs to watch in the second half: