2021 has been a blockbuster year for IPO activity in the US with no signs of slowing down, says GlobalData
In his book, The Dhandho Investor: The Low–Risk Value Method to High Returns, Mohnish Pabrai coined an investment approach known as "Heads I win; Tails I don't lose much." Q3 2021 hedge fund letters, conferences and more The principle behind this approach was relatively simple. Pabrai explained that he was only looking for securities with Read More
US IPO Activity Is Thriving In 2021
In the first seven months of 2021, US IPO activity thrived after a lackluster market environment in 2020, says GlobalData. According to the leading data and analytics company’s Deals database, there were 791 IPO listings registered with aggregate deal value of $212.5bn in the first seven months of 2021 on US stock exchanges. Compare this to the 188 listings with a deal value of $63.7bn in the corresponding period in 2020, and we see an outstanding increase of around 320% in listings and 233% in value.
Parth Vala, Company Profiles Analyst at GlobalData, comments: “IPO activities peaked in February 2021, with 199 IPOs and a deal value of around $65.1bn, followed by March with 195 IPOs with a deal value of $52.8bn.”
The Low-Interest Rate Environment Is Drawing Greater Investor Participation
Vala continues: “The main contributing factors of this frenzy are the low-interest rate environment, which is drawing greater participation of first-time investors; companies that held back on their IPOs in 2020, which are now back in business to take advantage of the extremely bullish run of the stock market, with market values touching record highs with little sign of correction in sight; and a growing preference for listing through special purpose acquisition company (SPAC) deals”.
Sectors topping the charts were financial services, with a volume of 364 and deal value of $105bn, followed by business and consumer services (185 deals with a value of $48.4bn), pharmaceuticals and healthcare (107 deals, $20.1bn), and technology, media & telecom (78 deals, $22.6bn). During the period, most of the proceeds were raised through SPAC deals, while work-from-home related technology offerings caught investor interest.
Vala concludes: ”With more stringent regulatory scrutiny on listings through SPACs, and with market correction right around the corner, it remains to be seen whether US IPO activity will continue to thrive.”
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