US IPO activities during the first quarter were quite dismal and while activity did pick up during the second quarter, overall IPO activity is down during the first half of 2015 when compared to the first half of 2014. So far this year, we have seen 101 IPOs take place with a total of $19.7 billion raised by the companies going public. However, the first half of 2014 saw 158 IPOs with a total of $35.4 billion. This represents a drop of 36% in the number of deals and a 44% drop in amount of capital raised during the IPO. While the first half was dismal, Americas IPO Leader at EY, Jackie Kelley, says “we are seeing strong activity in the second half of June and we expect activity to maintain good momentum in 2H15,” (EY.com).
Health care, technology, and financial sectors lead IPO activity
During the first quarter, there were some bright spots for the IPO market. Health care, technology, and the financial sector were the top three sectors with IPO activity. Health care had the largest impact with 40 deals totaling $3.5 billion in value. Next, technology came in with 15 deals totaling $3.2 billion. Lastly, the financial sector posted 9 deals during the first quarter with a value of $0.7 billion. Venture capital and private equity still hold a controlling position in the IPO market, with the two handling 64% of all IPOs during the first half. Venture capital and private equity hosted 65 deals and raised 59% of the total funds, or $11.3 billion. Analysts continue to see venture capital and private equity activity pick up during the second half of 2015.
Corsair Capital was down by about 3.5% net for the third quarter, bringing its year-to-date return to 13.3% net. Corsair Select lost 9.1% net, bringing its year-to-date performance to 15.3% net. The HFRI – EHI was down 0.5% for the third quarter but is up 11.5% year to date, while the S&P 500 returned 0.6% Read More
IPO performance still posting decent average returns
During the first half of 2015, IPOs gained an average of 21.1% on their first day of trading. The median market cap after the IPO had taken place was roughly $358.8 million. During the first half of 2015, the S&P 500 gained only 1.45%, Nasdaq is up 7.6%, and the Dow Jones has slipped -0.22%. As you can see, IPO activity may have fallen in relation to the first half of 2014, but IPO first day performance is still decent when comparing the results to the overall performance of the stock market. The largest IPO we have seen so far this year in 2015 was through Tallgrass Energy GP LP, an energy and power company, which raised $1.4 billion. However, the next four largest deals could not break above $770 million mark each.
Overall, the IPO market stalled during the first half of 2015 thanks in part to a slowing economy during the first half and a steep drop in energy deals. During 2014, the energy sector saw 29 IPOs, compared to only 7 in 2015 so far. The falling oil prices have really taken a bite out of energy deals, but as the price of oil continues to stabilize, this should help fuel activity during the second half of 2015 and beyond. While IPO activity has been lackluster so far this year compared to 2014, remember that 2014 was the busiest year for IPOs since 2000. While activity is still low, companies are still waiting to hear about direction from the Federal Reserve on interest rates, unemployment, and other economic activity measurements to get a sense of direction before entering into agreements to raise capital.