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U.S. IPO Market: Fewer IPOs in the Second Quarter as SPACs Drop Off

Companies and Markets

By Sara B. Potter, CFA  |  September 1, 2021

After surging in the first quarter of the year, initial public offerings (IPOs) on U.S. exchanges fell significantly in the second quarter, to their lowest level in a year. The second-quarter drop was driven by a sharp decline in offerings from Special Purpose Acquisition Companies (SPACs). There were just 39 SPAC IPOs in the second quarter compared to 292 in the first quarter. In the first quarter, SPACs represented 70.7% of all IPOs by volume; in the second quarter the share dipped to 23.1%.

IPO Activity Slows in the Second Quarter

According to FactSet data, U.S. exchanges saw 169 IPOs in the second quarter, a 59.1% decrease from the first quarter yet 128.4% higher than a year ago. In aggregate, IPOs raised $50.9 billion in the second quarter, down 63.7% compared to the first quarter and up 60.9% compared to the second quarter of 2020. SPAC IPOs raised just $6.8 billion in the second quarter compared to gross proceeds of $92.3 billion in the first quarter. Note that all 39 SPAC IPOs were priced at $10 per share.

quarterly-us-ipo-activity

Even though IPO volume fell sharply in the second quarter, the record number in the first quarter guarantees that 2021 will surpass 2020’s high mark. We saw 555 IPOs in 2020 but there were 582 in just the first six months of 2021.

annual-us-ipo-activity

IPOs in the $100-500 million range made up just over half of the quarter’s IPOs (53.8%), down significantly from the 74.6% share seen in the first quarter as SPAC IPOs became less dominant. There were 10 mega-IPOs (IPOs with gross proceeds above $1 billion) in the second quarter raising a total of $17.9 billion; this represented 5.9% of all IPOs. The top ten IPOs for the quarter raised $23.3 billion. Note that three direct listings are excluded from these figures: Coinbase (priced April 14, raised $28.7 billion), SquareSpace (priced May 19, raised $3.6 billion), and ZipRecruiter (priced May 26, raised $1.6 billion).

Ten Largest IPOs in 2Q 2021 (ranked by gross proceeds)

Company Name

Gross Proceeds (Mil. $)

FactSet Sector

Offer Date

Xiaoju Kuaizhi, Inc.

4,435.20

Technology Services

30-Jun-2021

AppLovin Corp.

2,000.00

Technology Services

15-Apr-2021

Full Truck Alliance Co. Ltd.

1,567.50

Transportation

22-Jun-2021

UiPath, Inc.

1,538.57

Technology Services

21-Apr-2021

Neuberger Berman Next Generation Connectivity Fund, Inc.

1,500.00

Miscellaneous

05-Apr-2021

Oatly Group AB

1,434.39

Consumer Nondurables

19-May-2021

Marqeta, Inc.

1,411.36

Finance

09-Jun-2021

SentinelOne, Inc.

1,408.75

Technology Services

30-Jun-2021

TuSimple Holdings, Inc.

1,351.35

Consumer Durables

15-Apr-2021

Agilon Health, Inc.

1,232.57

Health Services

14-Apr-2021

Source: FactSet

Finance Sector Continues to Lead but Margin Narrows

Of the 169 initial public offerings in the first quarter, 46 were in the Finance sector, dominated by the 39 SPAC IPOs. Tied for second were the Health Technology and Technology Services sectors, each with 37 IPOs. The Technology Services sector raised the most money, with gross proceeds of $18.1 billion. The Finance sector followed with gross proceeds of $9.4 billion, the lowest total for this sector since the first quarter of 2020.

IPOs by Sector (ranked by 2Q 2021 volume)

 

Number of IPOs

Gross Proceeds (Mil. $)

 

2Q 2021

1Q 2021

2020*

2Q 2021

1Q 2021

2020*

TOTAL

169

413

555

$50,871

$140,178

$193,620

Finance

46

305

325

$9,408

$94,219

$108,940

Health Technology

37

37

103

$5,457

$6,962

$19,622

Technology Services

37

23

57

$18,067

$13,521

$34,657

Commercial Services

13

8

14

$3,249

$771

$7,151

Retail Trade

9

6

13

$1,688

$6,974

$5,814

Health Services

5

4

7

$3,351

$2,234

$1,368

Consumer Services

3

4

2

$1,183

$902

$21

Electronic Technology

3

4

6

$67

$2,814

$2,222

Producer Manufacturing

3

3

4

$897

$1,488

$2,190

Consumer Non-Durables

3

2

3

$2,113

$703

$1,485

Miscellaneous

3

1

10

$1,815

$4,400

$7,148

Distribution Services

2

3

0

$517

$681

$0

Process Industries

1

3

3

$73

$789

$906

Transportation

1

3

2

$1,568

$1,124

$244

Consumer Durables

1

1

4

$1,351

$733

$1,667

Non-Energy Minerals

1

1

2

$14

$25

$186

Industrial Services

1

0

0

$53

$0

$0

Communications

0

3

0

$0

$1,462

$0

Energy Minerals

0

1

0

$0

$346

$0

Utilities

0

1

0

$0

$29

$0

Source: FactSet

*2020 excludes Palantir

Activity by Financial Sponsors Rebounds

There were 45 venture-capital-backed (VC) IPOs in the second quarter, the largest quarterly number we’ve seen since the global financial crisis (GFC). There were 12 private equity-backed (PE) IPOs in Q2 2021, a two-year high. Gross proceeds for VC-backed offerings totaled $18.1 billion, also a post-GFC high; PE-backed IPOs raised $3.6 billion. It’s interesting to see a resurgence of PE/VC financing as the dominance of SPAC IPOs waned in the second quarter. PE- and VC-backed IPOs together accounted for 33.7% of IPO volume in the second quarter and 42.7% of total gross proceeds. While these shares are below the 10-year average of 47%, they represent a dramatic turnaround from the 6.5% of volume and 6.2% of gross proceeds seen last quarter.

pevc-share-of-ipos

Legal Challenges for SPACs

Previously, I highlighted the potential negative impact of increasing regulatory scrutiny of SPACS by the Securities and Exchange Commission (SEC). Now we’re seeing a growing number of lawsuits being filed against SPACs by shareholders. All of this has had an obvious dampening effect on the number of SPAC IPOs.

spac-ipos-by-quarter

Looking Ahead

So far in 2021, 298 companies have released their initial preliminary filings and are still in registration (this excludes offerings that have been postponed or withdrawn). All but five of these are SPACs. Given the growing regulatory and legal challenges facing SPACs, it will be interesting to see what happens to these companies hoping to go public.

Aside from what is happening with SPACs, we have seen an uptick this year in consumer and retail IPOs. We have already had 29 IPOs this year in these categories, compared to just 22 in 2020. Will this trend continue? Concern is growing among market participants regarding the economic impact of the COVID-19 Delta variant. It remains to be seen what impact this has on financial markets broadly and on companies looking to go public that cater to consumers.

Note: All statistics are based on FactSet data for IPOs priced during the specified period for companies going public on exchanges in the United States. Note that data for previous quarters/years has been revised based on updated information, so values cited here may not match previous publications.

The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

StreetAccount

Sara Potter, CFA

Senior Marketing Content Specialist and Economic Contributor

Ms. Sara Potter is a Senior Content Specialist and Economic Contributor at FactSet. In this role, she develops a wide range of marketing content, as well as curates and contributes to the FactSet Insight blog, providing commentary on a wide range of economic and market topics. Since joining FactSet in 1999, she has led application and content development teams, focusing on the development of products to facilitate the analysis of global markets at a macro level. Prior, she held research economist positions at Toyota and Standard & Poor’s/DRI (now IHS Markit). She earned an M.A. in International Economics and Finance from Brandeis University and a B.A. in Math/Economics and French from Dartmouth College. She is a CFA charterholder.

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The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.