The IPO market could be gearing up in September
Only 59 initial public offerings (IPOs) have priced in 2016, down 56% from last year and marking the lowest level of IPO activity since 2009.
But a major pick-up could be coming for September and October.
Renaissance Capital, manager of IPO-focused ETFs, expects 35 to 45 IPOs in the remainder of the year, which would put 2016 on track for 100 deals raising about $15 billion.
Key will be the reception of the first wave of offerings after Labor Day, especially amid market friction surrounding election anticipation and Fed meetings, according to Renaissance.
Boosting the cadence of IPOs is strong performance of the few deals that have priced. The average IPO in 2016 is up 32% from its offer price, according to Renaissance, with 81% of deals trading above their issue price, aided by general market strength.
“A less active, more discerning market has required quality IPOs to come public at discounted valuations, resulting in an average return of 32%, compared to the S&P 500’s year-to-date gain of 6%,” according to Renaissance’s recent report.
Forty-three companies have submitted new or amended filings since June 1, with more potentially on tap after the Labor Day weekend.
Sector highlights
The technology, healthcare and financial industries comprise the majority of IPOs in the pipeline.
On tap are two private-equity backed insurers, Athene Holding and Ironshore, along with industrial manufacturer Mauser Group. CBS (CBS) also aims to spin off its radio business, and in the oil space, Noble Energy (NBL) has plans to unlock value from its Colorado pipelines.
Only nine technology companies have gone public this year, but four venture capital enterprise software IPOs filed in the final weeks of August. While IPOs from the largest tech unicorns are not expected to hit in 2016, strong performance by recent tech IPOs—including messaging app Line (LN)—could encourage others to move forward in the near-term, according to Renaissance Capital.
Meanwhile, the consumer space has seen only six public debuts year-to-date. Weak US retail sales thwarted the IPO prospects of Neiman Marcus along with smaller high-growth stores and restaurant chains. The year’s only retail IPO, At Home Group (HOME), has traded flat. Three consumer names with over $1 billion in sales have prepared IPOs, including lubricants supplier Valvoline, golf brand Acushnet and RV retailer Camping World.
However, even if the cadence does pick up as anticipated, 2016 is still expected to go down as the weakest year for new offerings since the financial crisis.
Nicole Sinclair is markets correspondent for Yahoo Finance.
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