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After a Stellar Q3, What Lies Ahead of IPO ETFs in Q4?
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The IPO market remains super solid this year. There have been 184 IPOs priced this year, up 23.5% from last year, per renaissancecapital. Total proceeds raised were $63.7 billion this year, up 47.2% from last year. About 224 IPOs were filed this year, marking an increase of 17.9% from last year.
There have been 173 SPAC IPOs this year, with healthcare taking about half the total volume. Some of these newly public biotech companies are working on coronavirus vaccines and therapeutics and thus have been hugely popular with investors.
What Lies Ahead?
The winning momentum of the third quarter (which was the busiest Q3 for the IPO market since 2020) is not likely to cool down in the holiday season as tech IPOs are preparing to hit the market this year.
Vacation rental online marketplace company Airbnb, food delivery provider DoorDash, kids gaming company Roblox and e-retailer Wish are all expected to file to go public by early next week, as quoted on CNBC. Per CNBC, it’s been the busiest year for tech IPOs, at the New York Stock Exchange.
In a nutshell, the fourth quarter of this year could be ruled by tech IPOs. The sector has been a beneficiary of the pandemic as it requires less physical involvement. Work-and-learn-from-home culture has made the space a winner.
The pandemic has, in fact, put DoorDash, Roblox and Wish in a sweet spot. “According to data from analytics firm Second Measure, the company [DoorDash] earned 49% of U.S. meal delivery sales in September, more than double Uber Eats, which captured 22% of the market,” as quoted on CNBC.
Roblox’s gaming app features millions of titles formed by and for kids. "Reuters reported last month that the company expects to increase its recent $4 billion valuation in its IPO" by twofold, quoted on CNBC. Wish has also been going steady due to its presence in the online marketplace.
There is also pent-up demand in the IPO market as the election uncertainty is now kind of over. The likelihood of a divided Congress means a status quo and possibly no major policy changes in the coming two years.
Against this backdrop, investors can bet on the following ETFs.
Defiance NextGen SPAC Derived ETF
The underlying Indxx SPAC & NextGen IPO Index of the fund SPAK tracks the performance of the common stock of newly listed Special Purpose Acquisition Companies (SPACs), ex-warrants, and IPOs derived from Acquisition Companies over the preceding 36 months. The fund gained 16.2% in the past three months.
The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed IPOs of companies whose unseasoned equities are under-represented in core U.S. equity indices. Notably, IPOs that meet liquidity & operational screens are included on the index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% and removed after two years. The fund charges 60 bps in fees. The fund was up 29.5% past three months.
The underlying Renaissance International IPO Index is a stock market index based upon a portfolio of non-U.S.-listed newly public companies, prior to their inclusion in global core equity portfolios. The fund charges 80 bps in fees. The fund was up 6.5% in the past three months.
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After a Stellar Q3, What Lies Ahead of IPO ETFs in Q4?
The IPO market remains super solid this year. There have been 184 IPOs priced this year, up 23.5% from last year, per renaissancecapital. Total proceeds raised were $63.7 billion this year, up 47.2% from last year. About 224 IPOs were filed this year, marking an increase of 17.9% from last year.
There have been 173 SPAC IPOs this year, with healthcare taking about half the total volume. Some of these newly public biotech companies are working on coronavirus vaccines and therapeutics and thus have been hugely popular with investors.
What Lies Ahead?
The winning momentum of the third quarter (which was the busiest Q3 for the IPO market since 2020) is not likely to cool down in the holiday season as tech IPOs are preparing to hit the market this year.
Vacation rental online marketplace company Airbnb, food delivery provider DoorDash, kids gaming company Roblox and e-retailer Wish are all expected to file to go public by early next week, as quoted on CNBC. Per CNBC, it’s been the busiest year for tech IPOs, at the New York Stock Exchange.
In a nutshell, the fourth quarter of this year could be ruled by tech IPOs. The sector has been a beneficiary of the pandemic as it requires less physical involvement. Work-and-learn-from-home culture has made the space a winner.
The pandemic has, in fact, put DoorDash, Roblox and Wish in a sweet spot. “According to data from analytics firm Second Measure, the company [DoorDash] earned 49% of U.S. meal delivery sales in September, more than double Uber Eats, which captured 22% of the market,” as quoted on CNBC.
Roblox’s gaming app features millions of titles formed by and for kids. "Reuters reported last month that the company expects to increase its recent $4 billion valuation in its IPO" by twofold, quoted on CNBC. Wish has also been going steady due to its presence in the online marketplace.
There is also pent-up demand in the IPO market as the election uncertainty is now kind of over. The likelihood of a divided Congress means a status quo and possibly no major policy changes in the coming two years.
Moreover, the recent resurgence in blank check and Special Purchase Acquisition Companies (SPAC) has been one of the main reasons for the rally in IPOs (read: The Simple Way to Invest in the Hottest SPACs and IPOs in 2020).
Against this backdrop, investors can bet on the following ETFs.
Defiance NextGen SPAC Derived ETF
The underlying Indxx SPAC & NextGen IPO Index of the fund SPAK tracks the performance of the common stock of newly listed Special Purpose Acquisition Companies (SPACs), ex-warrants, and IPOs derived from Acquisition Companies over the preceding 36 months. The fund gained 16.2% in the past three months.
Renaissance IPO ETF (IPO - Free Report)
The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed IPOs of companies whose unseasoned equities are under-represented in core U.S. equity indices. Notably, IPOs that meet liquidity & operational screens are included on the index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% and removed after two years. The fund charges 60 bps in fees. The fund was up 29.5% past three months.
Renaissance International IPO ETF (IPOS - Free Report)
The underlying Renaissance International IPO Index is a stock market index based upon a portfolio of non-U.S.-listed newly public companies, prior to their inclusion in global core equity portfolios. The fund charges 80 bps in fees. The fund was up 6.5% in the past three months.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>