As we began 2020, all signs pointed to a continuation of 2019’s solid IPO activity. Through the third week of February, when U.S. equity markets hit all-time highs, we saw 33 initial public offerings on U.S. exchanges. We were on track for a very strong Q1. Then a string of market losses in response to the growing COVID-19 coronavirus pandemic quickly turned the nearly 11-year-old bull market into a bear market. IPO activity dried up, with just two companies going public between February 24 and March 31.
There were just 35 IPOs in the first quarter, down 35% from the 54 companies in Q4 2019 and 15% lower than Q1 2019 when the U.S. government shutdown depressed activity. In terms of volume, the first quarter saw the worst quarterly performance since Q1 2017.
In terms of money raised, we saw just a slight dip from the previous quarter (-1.6%) due to three mega-IPOs in the quarter: PPD, Inc. (priced February 5, 2020, raised $1.9 billion), Reynolds Consumer Products, Inc. (priced January 30, 2020, raised $1.4 billion), and Churchill Capital Corp. III (priced Jan 29, 2020, raised $1.1 billion). Gross proceeds from IPOs in the first quarter totaled $9.1 billion, up 5.3% from a year earlier. The average money raised for the quarter was $260 million.
Of the 35 initial public offerings in the first quarter, 13 came from the Finance sector and nine from the Health Technology sector. This is a continuation of the trend we saw in 2019 when Finance sector IPOs led all sectors—Health Technology coming in second. Finance sector IPOs raised a total of $3.3 billion, with an average size of $257 million. First-quarter IPOs in Health Technology were smaller than average, raising an average of $151 million with the sector only seeing total gross proceeds of $1.4 billion.
The Finance sector led all sectors in terms of total money raised, followed by the Commercial Services sector with $1.9 billion and Producer Manufacturing, which raised $1.4 billion.
|
Number of IPOs |
Gross Proceeds (Mil. $) |
|||||
|
1Q 2020 |
2019 |
2018 |
1Q 2020 |
2019 |
2018 |
|
|
TOTAL |
35 |
234 |
273 |
$9,102 |
$65,375 |
$63,471 |
|
Finance |
13 |
81 |
87 |
$3,346 |
$15,240 |
$21,483 |
|
Health Technology |
9 |
61 |
82 |
$1,363 |
$8,074 |
$8,148 |
|
Technology Services |
4 |
40 |
39 |
$416 |
$25,698 |
$13,231 |
|
Commercial Services |
3 |
6 |
10 |
$1,882 |
$1,042 |
$5,846 |
|
Health Services |
1 |
6 |
2 |
$282 |
$1,517 |
$391 |
|
Retail Trade |
1 |
6 |
8 |
$64 |
$2,273 |
$3,359 |
|
Consumer Services |
1 |
5 |
3 |
$8 |
$1,927 |
$511 |
|
Consumer Durables |
1 |
2 |
7 |
$100 |
$34 |
$1,522 |
|
Producer Manufacturing |
1 |
1 |
6 |
$1,410 |
$106 |
$2,177 |
|
Transportation |
1 |
0 |
3 |
$230 |
$0 |
$950 |
|
Miscellaneous |
0 |
7 |
4 |
$0 |
$2,414 |
$1,072 |
|
Consumer Non-Durables |
0 |
4 |
2 |
$0 |
$1,764 |
$23 |
|
Electronic Technology |
0 |
4 |
4 |
$0 |
$269 |
$382 |
|
Distribution Services |
0 |
3 |
0 |
$0 |
$314 |
$0 |
|
Industrial Services |
0 |
3 |
8 |
$0 |
$1,110 |
$1,601 |
|
Energy Minerals |
0 |
2 |
2 |
$0 |
$115 |
$289 |
|
Process Industries |
0 |
2 |
3 |
$0 |
$3,476 |
$2,139 |
|
Non-Energy Minerals |
0 |
1 |
1 |
$0 |
$2 |
$13 |
|
Communications |
0 |
0 |
1 |
$0 |
$0 |
$3 |
|
Utilities |
0 |
0 |
1 |
$0 |
$0 |
$330 |
Source: FactSet
There were 12 venture-capital-backed IPOs in the first quarter, the lowest quarterly number since Q1 2019. There were no private equity-backed IPOs in Q1 2020, which also happened one year ago in Q1 2019. Gross proceeds for VC-backed offerings totaled $1.9 billion, slightly ahead of the $1.85 billion raised in Q4 2019.
In today’s COVID-19-focused market, companies that provide key technology services or health technology are surging. Looking at last year’s IPOs, we see that companies providing video communications (Zoom) and online educational services (GSX Techedu) have surged. 10 of the 15 top performers are either biotech or pharmaceutical companies.
|
Company |
FactSet Industry |
Offer Price |
Price as of 31-Mar-2020 |
Price Return |
|
First Seacoast Bancorp |
Savings Banks |
0.84 |
6.03 |
622.1% |
|
Karuna Therapeutics, Inc. |
Pharmaceuticals: Major |
16.00 |
72.00 |
350.0% |
|
Zoom Video Communications, Inc. |
Packaged Software |
36.00 |
146.12 |
305.9% |
|
GSX Techedu, Inc. |
Internet Software/Services |
10.50 |
42.36 |
303.4% |
|
BioNTech SE |
Biotechnology |
15.00 |
58.40 |
289.3% |
|
Palomar Holdings, Inc. |
Property/Casualty Insurance |
15.00 |
58.16 |
287.7% |
|
IGM Biosciences, Inc. |
Pharmaceuticals: Major |
16.00 |
56.15 |
250.9% |
|
Applied Therapeutics, Inc. |
Biotechnology |
10.00 |
32.69 |
226.9% |
|
Cortexyme, Inc. |
Biotechnology |
17.00 |
45.61 |
168.3% |
|
Beyond Meat, Inc. |
Food: Major Diversified |
25.00 |
66.60 |
166.4% |
|
TP Therapeutics, Inc. |
Pharmaceuticals: Major |
18.00 |
44.66 |
148.1% |
|
NextCure, Inc. |
Biotechnology |
15.00 |
37.07 |
147.1% |
|
Aprea Therapeutics, Inc. |
Pharmaceuticals: Major |
15.00 |
34.76 |
131.7% |
|
Oyster Point Pharma, Inc. |
Pharmaceuticals: Major |
16.00 |
35.00 |
118.8% |
|
Viela Bio, Inc. |
Biotechnology |
19.00 |
38.00 |
100.0% |
Source: FactSet
Looking ahead at future IPOs, there are 43 companies that released initial preliminary filings in 2019 and are still in registration (this excludes offerings that have been postponed or withdrawn). In addition, another 40 companies have released their initial preliminary filings so far in 2020. The current market conditions may keep many of these companies on the sideline for some time. We saw last year that investors are only looking to reward companies with growing revenues and a path to profitability as well as a solid leadership team. Despite the current market turmoil, there may still be opportunity for well-run technology companies
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.