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US IPO Market Contracts As Returns Slump In The Third Quarter

US IPO Market Contracts As Returns Slump In The Third Quarter by Renaissance Capital

The IPO market slowed in the 3Q 2015 to 34 deals, down 43% year-over-year, hurt by the broad market sell-off and specific sector conditions, including a near absence of tech and energy issuance. In addition, a significant number of IPOs were pulled or delayed due to market conditions or acquisitions. For the first time since 2011, average IPO returns were negative (-4%) and more IPOs ended the quarter below their offer price than above it. Health care companies again dominated IPO issuance thanks to biotechs, and for the first time in over 15 years the sector made up over half of the quarter’s deals, a trend that could be stymied by the sharp biotech correction at quarter-end. The technology sector, typically a cornerstone of the IPO market, had just one offering – the lowest level in over six years. Oil and gas IPOs evaporated amid low energy prices. The end of the quarter saw volatility at a new high, IPO returns at a new low, a dip in initial filings and a rate hike on the horizon, all of which suggest that IPO activity will continue at a slower pace than 2014 and will require greater price concessions on the part of issuers. We now enter the 4Q 2015 with several large offerings in the queue including Ferrari and Pure Storage, which should set the tone for a packed IPO pipeline.

Key Takeaways:

  • Quarterly Proceeds Falls to a Four-Year Low, But IPO Count Stays Above 2009-2012
  • Three-Quarters of IPOs were Health Care and Consumer; Tech had Just One Deal
  • Consumer Sector Produces Three of the Five Largest Deals; Other Large IPOs Pulled
  • Over Half of IPOs Have Negative Returns, Exacerbated by Broader Market Plunge
  • Biotechs Make Up Best and Worst IPOs
  • LBOs Dry Up But Private Equity Remains Active; Venture Capital Held Up by Health Care
  • IPO Pipeline Swells with Several Large High-Profile...