A Review of 2016 IPOs
The year 2016 marked the continuing declines for the IPO sector in the United States. The unimpressive number of 153 new releases in 2015 was cut down to an alarming 100 in 2016. The decrease was by a whopping 34.6%. It should be noted, however, that this total did not include SPACs or Unit IPOs. In 2016, the proceeds gathered according to IPO reports totaled $18.8 billion, $11.2 billion shy of 2015’s $30 billion total from proceeds.
In the health sector, the number of IPOs experienced a decline. The drop was from 78 new releases in 2015 to only 38 in 2016. This more than 50% decrease is highly alarming for the health IPO sector. The technology sector experienced yet another decline from 2014 and 2015. This time, the tech sector was only able to make 23 new offerings as compared to 26 in 2015. The continuing decrease in the technology sector is alarming. This is especially so when the number of releases is compared to the 55 new issuances that occurred in 2014 for this sector. However, 2014 was a record year for the IPO sector, and the decline in this sector would not have been as pronounced in average market conditions.
September and October marked the strongest months for the IPO sector. These months registered 16 and 19 new releases in the market respectively. The highly likely reason for this was because many companies sought to go public before the unpredictable US Elections. With the unexpected results from the elections, it seems these companies made the right decision.
The give and take of pricing this year was a major factor in the success of an IPO this year. Where the underwriter and the company conceded in pricing, the deals in the market for the IPO flourished. Companies that made a choice to push pricing limits in terms of their range and size were greatly unsuccessful. ZTO Express, for example, was greatly unsuccessful due to this reason.
There is a great success in the IPO’s aftermarket pricing this year. Over 70.2% of 2916’s new issuances currently trade above their issuance price. This marks the need for consistency in market trading even after the first sale of shares. Pops on the day of issuance averaged at 11.4% with the average aftermarket returns being at 11%.
The Healthcare sector composed of 38% of IPOs this year. This was an 8% decline from 46% in 2015. The average return from healthcare deals was 9%. Activity from the biotech sector is expected to decrease in 2017. Syros Pharmaceuticals was the best performing healthcare IPO in its opening week.
Offering for financial services IPOs was a decrease of 40.9% from the 22 offerings in 2015. The 13 new releases made this year accounted for 13% of 2016’s total offerings. The best first week and best performing company overall in this sector was Bats Global Markets.
The largest offerings this year, raising over $1 billion, were four. This is an increase from 3 issuances that raised over $1 billion in 2015. ZTO Express, one of the worst performers this year, was the largest deal in 2016. The company’s low performance continues to lay emphasis on the importance of right pricing. Amongst the biggest releases of the year, only ZTE is currently trading below its issuance price.
Along with projections for the year, expectations are high that 2017 will be a great year for IPOs in the technology sector. Many high-profit and notable companies are waiting for the right time to go public. Some of these high-profile names include Snapchat, Pinterest, Palantir, and Airbnb.