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Portfolio > ETFs > Broad Market

U.S. IPO Volume Surges in Q2

By Michael S. Fischer

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The U.S. market for initial public offerings perked up smartly in the second quarter, PwC reported Wednesday.

Volume increased by 83% and proceeds raised grew by 111%, compared with the first quarter.

Seventy-five IPOs were completed in the second quarter, raising some $13 billion. This compared with 41 IPOs and proceeds of $6.2 billion in the first quarter.

Thanks to continued investor interest across a wide spectrum of sectors, a high proportion of IPOs upsized and priced above or at the high end of their ranges, PwC reported.

The market nearly met the record high volume of the second quarter of 2014 with 36 IPOs in the final month. This represented the most June IPOs since the technology IPO boom in 1999, according to PwC data.

“Among listings in the second quarter were several well-known brands, which drew significant investor attention to their offerings and the IPO market,” Neil Dhar, U.S. capital markets leader in PwC’s deals practice, said in a statement.

“As companies look to take advantage of the open IPO window, it’s likely that we’ll continue to see big name brands tap the capital markets and help provide support for continued interest in IPOs through the rest of 2015.”

The healthcare sector continued to lead IPO market activity with 31 IPOs, or 41% of total volume. PwC said the high demand for smaller biotechnology and biopharmaceutical IPOs showcased investor interest in high-growth companies.

The second quarter was generally well-diversified on a total proceeds basis, the report said. The energy sector raised the highest proceeds with $2.7 billion from only six IPOs—all master limited partnerships—as energy prices slowly began to recover.

“Momentum built toward the end of the quarter with many quality names coming to market, and a doubling of activity in companies coming out of confidential filing into the pre-roadshow public filing environment bodes well for the third quarter,” Derek Thomson, U.S. capital markets research leader at PwC’s deals practice, said in the statement.

Financial sponsors and venture capital companies in the second quarter collectively backed 65% of IPO volume and 62% of IPO value, according to the report. They were most active in the healthcare and technology sectors.

“Companies with good growth stories to tell are well-positioned to attract investors looking for yield,” Thomson said.

PwC reported that the average first-day gain of the 75 IPOs that priced during the second quarter was 17%, seven percentage points above the first-day gain for IPOs priced in the first quarter.

Second quarter IPOs also saw strong aftermarket performance, with a 13% return between IPO date and quarter close. In comparison, the S&P 500 ended the quarter flat, largely because of late June volatility, which erased the quarter’s previous gains and broke the index’s streak of nine consecutive positive quarters.

Consumer, health care and technology companies generated the strongest first-day IPO returns on average, and also performed well between IPO date and the quarter’s end.

The report said second-quarter U.S. follow-on offerings were in line with the same period in 2014, with 198 offerings raising $52.7 billion. This represented a 5% decrease in volume but a 4% increase in value.

Of the second-quarter follow-on offerings, 29% were backed by financial sponsors as a result of firms seeking to exit their portfolio investments. Financial sponsors have also been active in the M&A market in 2015.

PwC said its M&A outlook found that private equity deals accounted for 5% of M&A value and 17% of volume through the first five months of 2015, or 798 deals representing $44 billion.

— Check out Disgruntled Investors Are a Big Crowdfunding Risk on ThinkAdvisor.

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