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IPOs staged a decent show in 2019, after a wobbly start due to government shutdown. Notably, 2020 resembles this momentum. The IPO space, which was hit hard by the coronavirus-led rout in March, seems to be to gathering steam now (read: Warner Music Debut, New Offerings to Boost IPO ETFs).
Last week was the busiest so far this year. For the first time since June 2018, all eight IPOs raised more than originally expected. The week was led by the debut of Warner Music GroupWMG on Nasdaq, which raised $1.9 billion. ZoomInfoZI, a cloud-based platform for sales and marketing teams, also raised almost $1 billion last week. Shares of ZoomInfo jumped about 60% on its first day of trading.
Biopharmaceutical company developing CAR-T cell therapy, Legend Biotech (LEGN), raised $424 million at a market cap of $3.2 billion, becoming the year's largest U.S. biotech IPO to date. Payment processing solutions provider Shift4 PaymentsFOUR also made a move in the market last week. The company priced its IPO above its range, at $23 a share. Shares surged 45% on Jun 5. Shift4 Payments delayed its entry in the market due to COVID-19.
Other entrants were Chinese delivery platform Dada Nexus (DADA), inflammatory disease biotech Applied Molecular Transport (AMTI), phase 2 fibrosis biotech Pliant Therapeutics (PLRX) and Calliditas Therapeutics (CALT). Dada Nexus, Applied Molecular, Pliant Therapeutics and Calliditas raised about $345 million, $154 million, $144 million and $90 million, respectively.
What Led to the Bounce in IPO Market?
The recent uptick in IPOs came amid the “biggest 50-day market rally in history” following the March 23rd lows. Investors appear to show renewed interest in IPOs following the WeWork fiasco. Notably, the American co-working space operator's IPO was called off as it failed to amass retail investors’ interest even after slashing valuations to $10-12 billion from the $47 billion valuation.
A few months back, an EY report said that the United States may see a front-end loaded IPO in 2020, given the presidential election scheduled in November, which can cause volatility in the market. Brazil and Canada have solid IPO pipelines for 2020. Asia-Pacific is also about to see a busy first half while EMEIA is expected to log an improved scenario with fading trade tensions and less ambiguity over Brexit.
What Awaits in the Near Term?
Though the coronavirus outbreak disrupted the impetus in March, the momentum returned with surging stock prices. Initially, three IPOs had plans to raise $431 million this week, led by online used car seller Vroom (VRM), Chinese mobile data marketplace uCloudlink (UCL) and oncology biotech Lantern Pharma (LTRN).
But Vroom said on Jun 8 that it plans to raise $467.5 million. Meanwhile, uCloudlink intends to raise $50 million at a $581 million market cap while Lantern Pharma will likely raise $25 million at a $108 million market cap. A number of health care deals are also in the pipeline, including pharmaceutical royalty acquirer Royalty Pharma (RPHA.RC), preclinical biotechs Generation Bio (GBIO), Avidity Biosciences (RNA) and Vaxcyte (PCVX), per Renaissance Capital.
The IPO market has been equally upbeat internationally with Hong Kong expected to remain among the top three IPO markets globally in 2020, per PWC. In 2019, the Hong Kong exchange main board raised HK$314.5 billion through 169 IPOs, the highest amount of any global IPO market.
Changes in IPO rules have led to the success. Alibaba’s secondary listing in Hong Kong late last year will act as a cornerstone for other big Chinese and global companies to come up with plans to launch IPOs in Hong Kong.
Hong Kong’s stock exchange is now intending to lower the IPO settlement cycle from the current five days. Such a move will bring the world’s biggest listing market more in line with the competing bourses.
How to Tap?
Against this backdrop, investors can tap ETFs like the U.S.-centric First Trust US IPO IndexFund (FPX - Free Report) , Renaissance IPO ETF (IPO - Free Report) as well as the international versions like Renaissance International IPO ETF (IPOS - Free Report) and First Trust International Equity Opportunities ETF(FPXI.
IPO, FPX, IPOS and FPXI have gained 16.9%, 10.2%, 18.4% and 13% past month, respectively, (as of Jun 5, 2020) in contrast to 10.9% gains in the S&P 500.
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IPO ETFs Sizzling Hot on Global Market Rally
IPOs staged a decent show in 2019, after a wobbly start due to government shutdown. Notably, 2020 resembles this momentum. The IPO space, which was hit hard by the coronavirus-led rout in March, seems to be to gathering steam now (read: Warner Music Debut, New Offerings to Boost IPO ETFs).
Last week was the busiest so far this year. For the first time since June 2018, all eight IPOs raised more than originally expected. The week was led by the debut of Warner Music Group WMG on Nasdaq, which raised $1.9 billion. ZoomInfo ZI, a cloud-based platform for sales and marketing teams, also raised almost $1 billion last week. Shares of ZoomInfo jumped about 60% on its first day of trading.
Biopharmaceutical company developing CAR-T cell therapy, Legend Biotech (LEGN), raised $424 million at a market cap of $3.2 billion, becoming the year's largest U.S. biotech IPO to date. Payment processing solutions provider Shift4 Payments FOUR also made a move in the market last week. The company priced its IPO above its range, at $23 a share. Shares surged 45% on Jun 5. Shift4 Payments delayed its entry in the market due to COVID-19.
Other entrants were Chinese delivery platform Dada Nexus (DADA), inflammatory disease biotech Applied Molecular Transport (AMTI), phase 2 fibrosis biotech Pliant Therapeutics (PLRX) and Calliditas Therapeutics (CALT). Dada Nexus, Applied Molecular, Pliant Therapeutics and Calliditas raised about $345 million, $154 million, $144 million and $90 million, respectively.
What Led to the Bounce in IPO Market?
The recent uptick in IPOs came amid the “biggest 50-day market rally in history” following the March 23rd lows. Investors appear to show renewed interest in IPOs following the WeWork fiasco. Notably, the American co-working space operator's IPO was called off as it failed to amass retail investors’ interest even after slashing valuations to $10-12 billion from the $47 billion valuation.
A few months back, an EY report said that the United States may see a front-end loaded IPO in 2020, given the presidential election scheduled in November, which can cause volatility in the market. Brazil and Canada have solid IPO pipelines for 2020. Asia-Pacific is also about to see a busy first half while EMEIA is expected to log an improved scenario with fading trade tensions and less ambiguity over Brexit.
What Awaits in the Near Term?
Though the coronavirus outbreak disrupted the impetus in March, the momentum returned with surging stock prices. Initially, three IPOs had plans to raise $431 million this week, led by online used car seller Vroom (VRM), Chinese mobile data marketplace uCloudlink (UCL) and oncology biotech Lantern Pharma (LTRN).
But Vroom said on Jun 8 that it plans to raise $467.5 million. Meanwhile, uCloudlink intends to raise $50 million at a $581 million market cap while Lantern Pharma will likely raise $25 million at a $108 million market cap. A number of health care deals are also in the pipeline, including pharmaceutical royalty acquirer Royalty Pharma (RPHA.RC), preclinical biotechs Generation Bio (GBIO), Avidity Biosciences (RNA) and Vaxcyte (PCVX), per Renaissance Capital.
The IPO market has been equally upbeat internationally with Hong Kong expected to remain among the top three IPO markets globally in 2020, per PWC. In 2019, the Hong Kong exchange main board raised HK$314.5 billion through 169 IPOs, the highest amount of any global IPO market.
Changes in IPO rules have led to the success. Alibaba’s secondary listing in Hong Kong late last year will act as a cornerstone for other big Chinese and global companies to come up with plans to launch IPOs in Hong Kong.
Hong Kong’s stock exchange is now intending to lower the IPO settlement cycle from the current five days. Such a move will bring the world’s biggest listing market more in line with the competing bourses.
How to Tap?
Against this backdrop, investors can tap ETFs like the U.S.-centric First Trust US IPO IndexFund (FPX - Free Report) , Renaissance IPO ETF (IPO - Free Report) as well as the international versions like Renaissance International IPO ETF (IPOS - Free Report) and First Trust International Equity Opportunities ETF (FPXI.
IPO, FPX, IPOS and FPXI have gained 16.9%, 10.2%, 18.4% and 13% past month, respectively, (as of Jun 5, 2020) in contrast to 10.9% gains in the S&P 500.
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 >>