Led by Tech, Healthcare Debuts, IPOs in 2019 Show Positive Returns
Even as Uber, Lyft, and other high-profile initial public offerings underperformed out of the gate, the average share price of companies that have gone public in the US this year is up by almost 33 percent.
That’s according to data based on the mean returns of issuers that started trading through June 19, released by accounting firm Ernst & Young (EY) on Tuesday. On average, those companies’ shares are up 32.6 percent compared to their offer price at IPO. The EY data show the firm anticipates there will have been a total of 88 IPOs in the first half of the year, with proceeds of $32.2 billion and a median size of $122 million.
While the IPO market had a slow start this year, the second quarter was a busy one with 66 IPOs that collectively raised $27 billion. Total proceeds skyrocketed by 79 percent in that quarter compared to the same time in 2018, an increase that EY data show was bolstered by public offerings of tech “unicorns”—companies valued at over $1 billion. However, notwithstanding the feverish attention paid to the market thanks to those much-heralded debuts, the total number of public offerings so far this year is 20 percent fewer than at the same time last year. The amount raised in proceeds was flat.
The healthcare sector had the highest number of IPOs in the second quarter of the year—26, collectively raising $5.9 billion. One fewer tech company debuted, but the tech businesses that went public during the quarter raised nearly three times the funds the healthcare companies did—a total of $17.4 billion. Uber (NYSE: UBER), the largest by proceeds in the quarter, raised $8.1 billion when it priced on May 9, followed by lab equipment and chemical supplier Avantor (NASDAQ: AVTR), which pulled in $3.3 billion later that month, and image-sharing website Pinterest (NYSE: PINS), which reaped $1.6 billion in April, according to EY.
Although Uber and Lyft (NASDAQ: LYFT) continue to trade beneath their IPO prices, those entries into the public market along with that of other hotly anticipated companies is “reigniting IPO activity and sparking an increase in constructive investor sentiment,” according to Jackie Kelley, the head of EY’s American IPO markets. The fact that the majority of the IPOs so far this year—especially the high-growth companies—saw positive post-IPO returns bodes well for additional activity, she said in the firm’s latest IPO report.