The US IPO market has continued to make waves in 2018, by deal count and proceeds being the third most active year in a decade. 65 IPOs that were listed on the US exchange were cross-border, signalling continued confidence in the Americas markets. Up to Q3 2018, IPOs were generally well-received, the market saw only 18% of IPOs pricing below their ranges, and average deal value the strongest in 4 years, steadily increasing since 2016. 27% of IPOs which were private equity and venture capital backed meant that private investors exited at a profit, first-day returns averaged at 15.1%.
On the flip side, there have been sharp dips for public investors post-IPO. A retreat in the major US indices during Q4 erased gains in H1, following the opacity around Brexit, uncertainty of economy and concerns over slowing global economic growth. Varied reasons for decline including competition at a time of short-lived booms such as the online lending industry.
Year end returns for 2018 saw US IPOs average a -1% return, outperforming the choppy US markets which returned -4% on NASDAQ, -6% on the S&P 500 and -12% on the Russell 2000.
Nonetheless, company valuations have a chance to recover from market turmoil. Notably Facebook lost tens of billions of dollars in market capitalization in its first year on the market, but today its shares trade many multiples higher than the 2012 IPO price.
Source and notes:
PwC US Capital Markets Watch, Global IPO trends: Q4 2018 EY Report, Renaissance Capital IPO Index as at March 2018.