IPOs Are Coming Back

  • U.S. IPO market reopens after worst of pandemic, before election uncertainty
  • Number of IPOs priced in 2020 down 34% from same time last year
  • Warner Music Group is the biggest IPO so far in 2020

Yesterday shares in Vancouver, Washington-based ZoomInfo Technologies (not to be confused with the video conferencing platform) soared over 60% on their first day of trading on the Nasdaq index. The first tech IPO since the COVID-19 outbreak was a smashing success with the firm raising $934 million. This is almost double what it was looking to raise back in November when it first announced plans. The company priced its IPO at $21, above its $19 to $20 target range, and shares closed at $34.

As of Thursday, there have been 40 IPOs priced (over $50 million market cap) in the U.S. this year, according to Renaissance Capital. This is 34% lower than the same date last year. Total proceeds raised are $12.3 billion, half of what it was last year at this time. (see chart below) The pandemic derailed several companies' plans to go public ahead of the election uncertainty that is expected later this year.

Source: Renaissance Capital.

We're still not rid of the novel coronavirus, the U.S. is seeing widespread unrest, and unemployment is soaring, but investors are still hungry for yield. We've seen huge demand for corporate debt after the Fed announced its stimulus measures in mid-March. This week we're also witnessing the U.S. initial public offering market recover in a big way. Newly public U.S. listed companies, like Uber, Spotify, Slack, Zoom Video, and Moderna, are also beating the broader market this year. The Renaissance IPO Index is up almost 25% this year.

"You’re going to see a wave of IPOs come to market that are larger rather than smaller because in volatile markets investors want more liquidity. This is not a market where the marginal, smaller IPO will get done," said Neil Kell, chair of global capital markets for Bank of America, according to a Financial Times report.

Earlier this week, Warner Music Group, which delayed its plans in March, priced its IPO at $25. It was at the higher end of its target range, and shares rose 8% in their debut after the company raised $1.9 billion. Electric truck maker Nikola's debut yesterday just made its 38-year-old founder a multibillionaire. Today Shift4 Payments will start trading on the NYSE after it priced its IPO at $23 per share, above its expected range and raised $345 million. Remote health care service provider Amwell, which has seen virtual visits increase 1000% since the crisis began, has filed confidentially to go public, according to CNBC. Online used-car seller Vroom, which is yet to turn a profit, said Tuesday it is looking to raise up to $318.8 million next week.

Even some Chinese firms are keen to get in on the action despite signs that the U.S. is tightening auditing rules. Walmart & JD.com-backed online grocery firm Dada Nexus will make its stock market debut today. Bloomberg reports it has raised $336 million and sold 21 million shares, more than it originally planned to, at $16 each.

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