The U.S. Initial Public Offering (IPO) market set a 14-year high with 273 IPOs, the most since 2000 when 406 companies went public, according to IPO research specialist Renaissance Capital.
Biotech and healthcare led the 2014 market in terms of number and performance, while technology IPOs were healthy in volume but only average in performance. The average IPO returned 16% over its IPO price — close to the 10-year average — but much of this came in the initial pop as the average “aftermarket” (performance after the first open market trade) was only 3%.
Eight of the top ten IPOs of 2014 were biotechs, where performance was driven by investor interest in new treatments.
As Renaissance points out, it was an interesting year in which geopolitical crises did nothing to deter investor appetites for IPOs.
“While various global events, such as Russia’s incursion into the Ukraine and conflicts in the Middle East, caused nervousness in global markets, they largely failed to disrupt the US IPO applecart,” says the Renaissance US IPO Market 2014 Review.
Some other highlights:
- It was the second year of uninterrupted IPO activity, up 23% over 2013, due to a doubling of biotech issuance.
- Proceeds of $85 billion, inflated by Alibaba’s $22 billion offering, were up 55% over 2013.
- Average IPO performance of 16% for the year was close to the ten-year mean, but well below the 41% average return in 2013.
- Despite a handful of mostly small-capitalization IPOs that rose over 100%, investors hewed to strict valuation discipline, with 40% of IPOs pricing below the range.
Technology IPO performance was quite average, clocked in at 14%. The market technology IPOs were dwarfed by the IPO of Chinese online company Alibaba Group Holdings (NYSE: BABA), which sported at $22B IPO size and rose 60.3% return from its offering price. This was an all-time record for IPO size.
There were 55 technology IPOs in total, with $32.3 billion in total deal sizes, representing 20% of the market by number but largest by deal volume. However, that number was of course skewed by the heft of Alibaba. Healthcare, led by the biotech boom, had the largest share in deal number and size, with 100 IPOs or 37%.
Renaissance says this this sets us up for a solid 2015 IPO market, as a “healthy pipeline and still positive US economic backdrop should support another year with more than 200 IPOs.”
The full report is available here.