While Uber Technologies Inc. and Lyft Inc. kicked off the IPO blitz of 2019, lesser-known companies such as Beyond Meat Inc. and Zoom Video Communications Inc. have reaped the rewards.
Stellar gains by the meatless burger maker and video conferencing firm helped deliver an exceptionally strong first half for U.S. initial public offerings. The 93 companies that have gone public were up an average 30% as of June 28, according to data compiled by Bloomberg.
Beyond Meat rose more than 500% since debuting in May while Zoom was up 141% since pricing in April.
Uber, which raised $8.1 billion in the year’s largest IPO, fell 1.6%. Lyft, which quickly became a short-seller target after the year’s third-biggest IPO, has seen its shares drop almost 14%.
Uber and Lyft still accounted for a third of the $32 billion raised during the first half of the year — and can rightly claim to have fueled one of the best IPO rallies in years. Year-to-date U.S. IPO proceeds were also the best since 2009 at $40 billion.
“It is a FOMO — fear of missing out — mentality on IPOs because investors are underperforming their benchmarks and looking at IPOs as a way to catch up on performance,“ said Kristin DeClark, the co-head of Barclays Plc’s U.S. equity capital markets practice and global head of technology ECM.
IPO hopefuls faced hurdles early this year such as a partial federal government shutdown that made the U.S. Securities and Exchange Commission unable to review proposed listings. The first big company to break through turned out to be one of the nation’s oldest: jeans-maker Levi Strauss & Co., which raised $623 million in March.
But the biggest standout of the year so far is Beyond Meat. The maker of substitute meat made from chickpeas and beets has given its investors a 550% return on its offer price after it raised $241 million.
Biotech startups contributed disproportionately to the gains with Bridgebio Pharma Inc. and Adaptive Biotechnologies Corp. recording major pops on the same day they went public in June.
Zoom was among a handful of enterprise technology companies that have notched big gains.
Pagerduty Inc., which makes tools for software developers, and cybersecurity firm Crowdstrike Holdings Inc. have risen 92% and 86%, respectively.
WeWork Cos., Peloton Interactive Inc., Postmates Inc., Poshmark Inc. and Medallia Inc. are among technology companies preparing IPOs later this year. Others that advisers say could tap the public markets in the next year or so include cybersecurity names Palantir Technologies Inc. and Ping Identity Corp., as well software provider CloudFlare Inc.
Paul Donahue, Morgan Stanley’s head of equity capital markets for the Americas, expects that IPOs will remain busy in the third quarter and beyond.
“There are literally hundreds of growth companies in lots of different sectors,” he said in an interview. “It’s a very deep pipeline of great global leaders that we think can come public over the course of the next 24 months.”
One of the most closely watched deals wasn’t an IPO at all. Slack Technologies Inc., which didn’t need to raise new capital, completed a direct listing in June, allowing its investors to sell shares with no lock-up period. Shares of the workplace messaging app opened at $38.50 and closed at $36.55 on Tuesday.
Goldman Sachs Group Inc. and Morgan Stanley have been in talks with more than a dozen firms considering direct-listings, including Airbnb Inc., Bloomberg News has reported.
“There is probably a handful of companies that could successfully execute a direct listing, particularly those that already have a good roster of cross-over institutional investors,” Barclays’ DeClark said.