FactSet Asks: Is the IPO Market Dead?

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2014 was a blockbuster year for IPOs, but the momentum has clearly not carried over into this year. A March 23rd report from FactSet Insight argues that while the IPO market is certainly off to a slow start in 2015, it is by no means down for the count. Midwest IM Consultant Michael Moreau highlights that decisions by large social media firms such as Pinterest and SnapChat to go public could turn the IPO market around quickly.

U.S. IPO market slow out of the gate in 2015

In his report, Moreau presents several key statistics relating to the current U.S. IPO market.:

  • There have been 25 total IPOs year to date versus to 47 IPOs at this point last year (representing a 44% decline)
  • There have been nine IPOs from the Biotechnology and Medical Specialties sectors (versus 20 last year)
  • There have been 176 follow-on offerings this year versus 147 in 2014 (representing a 16.5% increase).

IPO market

There’s reason for hope things will improve in the second half of 2015

Moreau argues that just because IPO activity is “well below the unrealistic pace of 2014” doesn’t mean the market has gone bust. He points out that last year was the biggest year for IPOs since the turn of the century. Moreover, firms today are raising more private capital from friend and family, angel investors, and venture capitalists than they have in the past, which further slows down the timeline for going public.

IPO market

Also keep in mind that the strong dollar is not helping as it results in higher costs and increased foreign competition at lower price points. FactSet data shows that gross proceeds from IPOs are off 42% from 2014, making clear just how stagnant the IPO market is this year. That said, Moreau notes in closing: “there are many big name private companies such as Pinterest, SpaceX, and Snapchat that could completely change the IPO landscape this year.”

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