Equity investors flourished in 2016 with all major indices in the U.S. reaching record highs. But while Wall Street is popping balloons, the IPO (Initial Public Offering) market has languished with record low number of IPOs filed and priced, and a subdued amount of capital raised. Additionally, 2016 was a poor year for IPO stock performance. (See also: 4 Reasons for the IPO Market Slowdown in 2016)
To put it in perspective, the total amount raised for IPOs in 2016 was less than the amount for the single largest IPO of all time (as of September 7, 2018) – Alibaba Group Holding's (BABA) 2014 deal that raised $21.8 billion. (See also: The Top Five Alibaba Shareholders in 2016)
According to Renaissance Capital, there were only 119 IPO filings in 2016, the lowest number since 2009 and the smallest amount of capital raised over 10 years. Moreover, looking at performance, 2016 IPOs returned just 0.6 percent as of December 12, 2016, well below the S&P 500.
The biggest IPO of the year was also one of the most unsuccessful. In October, Chinese package delivery firm ZTO Express (ZTO) raised $1.4 billion in a public offering. ZTO priced 72.1 million shares at $19.50 a share, which was above its target price range of $16.50-$18.50. By going public, ZTO increased its access to cash, which will help it take advantage of the world's largest delivery services market, with total parcel volume in China hitting 20.7 billion in 2015 according to the ZTO Express prospectus.
Shares in ZTO Express opened below its IPO price with the first trade at $18.40 per share and has been steadily declining. It closed on September 7, 2018 at $17.69 per share.
The Best Performing IPOs
Despite the subdued activity and overall under performance there were some standouts, with five companies that have gained more than 100% year to date since going public. The best-performing IPO companies as of December 2016 were:
- 1. Acacia Communications: Acacia Communications Inc. (ACIA) went public in May after it raised $103 million. The telecommunication company specializes in products that transfer data from optical interconnections into a silicon-based chip, which helps tech firms identify performance issues. The company relies on a small number of key clients. Opening at $23 a share, the stock rose 193 percent to be the best performing IPO of 2016.
- 2. AveXis: AveXis Inc. (AVXS) is an Illinois-based gene therapy company that was developing treatments for patients suffering from rare and often life-threatening neurological genetic diseases. In February, it raised just under $100 million and its share price rose 169 percent by mid-December.
- 3. Novan: Novan Inc. (NOVN) is a drug development company that was developing nitric oxide-based therapies in the field of dermatology. Founded in 2006, Novan raised $44 million and returned 147 percent by mid-December.
- 4. Impinj: Founded in 2000, Impinj Inc. (PI) is a Seattle based manufacturer of radio-frequency identification software and devices. Impinj has partnerships in Asia and sells products locally and in the Middle East and Africa. After 16 years the company went public this year raising $67 million and was up 135 percent by mid-December.
- 5. Twilio: Twilio Inc. (TWLO) is a cloud communications company that went public in June raising $150 million at an IPO offer price of $15 a share. Twilio allows users to send and receive phone calls and text messages via a program that is purely hosted on the cloud. In its third day of trading, Twilio was up 90 percent and by mid-December was up 101 percent.
The second largest IPO in 2016 was Japan-based mobile messaging app Line. Line raised $1.1 billion and went public in July offering 35 million shares at an offer price of $32.84. In March that year, Line had over 200 million monthly users, and unlike other popular messaging apps WhatsApp and Viber, Line offered over 30 different apps to download from its platform. These apps range from games to music streaming. (See also: How Does Line Work and Make Money?)
Rounding out the top three IPOs by size for 2016 is financial retirement services company Athene Holding, which raised $1.08 billion.