As the IPO Market’s first fiscal quarter comes to a conclusion, events have taken a turn for the worst to say the least. As equities rallied during the fourth quarter of 2019, and set record breaking highs during its 2020 debut, investors were greatly optimistic in IPOs yielding substantial returns for the remainder of the quarter. However, expectations were cut short when IPOs came to a screeching halt as the novel coronavirus scared away potential offerings. See my key points from the 1Q 2020 IPO Market below:
Key Facts (US IPO Market)
- 24 US IPOs collectively raised 6.8 bn (decrease in both volume and net proceeds by 40% and 11% respectively in comparison to Q1 2019)
- Healthcare sector produced largest returns of 24% most notably PASG yielding 23% YTD return
- Many IPO’S such as Avadim Health have been postponed (hopes of debuting when market volatility eases)
- Shift from Finance (2019 Q4 leading sector) to Healthcare (2020 Q1 leading sector) due to combatting COVID-19
- Q4 2019 Finance sector raised 3.7 bn with a 18% overall return compared to Q1 2020 Finance sector’s 12% yield.
- Sector Leaders: Healthcare sector produced 3.4 bn (half of Q1 2020 IPOS) and yielded 24% while the biotech sector returned 21%
- Decrease in both volume and proceeds by 55% and 26.4% respectively in comparison to 2019 Q4
- Three unicorn IPOs (offer amount that exceeds 1bn) debuted namely Reynolds Consumer Products
Many companies have prepared deals behind the scenes while volatility postpones the IPO market….
2 key IPO indicators (volume and proceeds) from the past 7 years’ first fiscal quarter are displayed below:
The graph illustrates how Q1 2020 marked a significant decrease in volume and proceeds compared to the past few years (2016-2019) where the IPO market was on a steady uptrend.
Global IPO Market
- 235 IPO’s netted 28.5 bn in proceeds (increase in both volume and proceeds by 11.3% and 89% respectively in comparison to Q1 2019)
- Proceeds from March IPOs dropped significantly as IPOs net 7.1 bn compared to 21.4 bn from the previous months of January and February
- Sector Leaders: Industrial sector accounted for 20% of IPOs netting 6.3 bn along with tech responsible for 40 deals
- 1383 IPOs and 1115 IPOs in 2018 and 2019, respectively
- 2019 resulted in 1115 IPOs raising 198 bn (decrease in both volume and proceeds by 19% and 4%, respectively compared to the fiscal 2018 year)
As the world struggles to combat the invisible enemy, the first glimpses of economic turmoil are beginning to emerge, especially in the US. While many claim economists have been predicting the conclusion of a bull run for years, the idea of a bear market of such severity was never in the cards for our country’s economic future. However, now, the idea of a potential recession and the possibility that we are already engulfed by one, makes more sense than ever before .