US Equity markets in 2019 benefited from strong investor interest, with the S&P and NASDAQ producing outsized returns of 29% and 35%. Driven by historically low unemployment, increases in employee wages and interest rate cuts, 2019 remained resilient against foreign trade wars and recession indicators that persisted from the prior year.
The US IPO market had another strong year in 2019, with 196 IPOs pricing, representing an 8% decrease from the 2018 total of 214 IPOs - more of a testament to a very active 2018 than a slow 2019. There was a marked reduction in the number of foreign private issuers on US markets. An increased proportion of highly anticipated megadeals (IPOs >$1 billion) pushed proceeds up 4% to $56.3 billion, which is the highest annual proceeds for the past 5 years.
US IPOs were dominated by issuances from 3 sectors: Special Purpose Acquisition Companies ("SPACs"), Pharma and Life Sciences ("PLS"), and technology companies in the TMT sectors.
The number of SPACs continued to increase in 2019, and have jumped from 4% in 2013 to 30% in 2019 in terms of the total share of annual IPOs. SPACs lead in volume three out of four quarters in 2019, and looking forward, the surge in SPACs will likely translate into greater activity in deal markets as they fulfil their acquisition strategies.
Life Sciences IPOs continued to be popular with investors, with biotechnology and medical device companies featured prominently. Biotech IPOs typically were able to price during their Phase 1 and Phase 2 clinical trial stages.
The Technology, Media, and Telecommunications (“TMT”) sector, which consisted of almost only technology companies in 2019, produced just under half of total proceeds. As a high growth sector, technology IPO investors may be shifting their preference from a focus on scaling market share and revenues, towards an increasing focus on a company’s path to profitability.
"Current economic trends and investor sentiment indicate that the IPO markets will continue to remain robust into the new year. However geopolitical announcements, US election results, and Fed policy decisions will need to be taken into account."
Direct listings received notable market headlines in the last two years, with two major direct listings taking place on the NYSE along with one on the NASDAQ. Despite significant attention and the prospect of a less expensive offering (as no underwriters are involved), direct listings appeal to a unique subset of companies that benefit from public market liquidity and valuation, without raising dilutive capital from the investment community. Both issuers and investors are evaluating the suitability of a direct listing for their situation.
Please note: IPOs with proceeds that are less than $25mm, best efforts offerings, oil and gas royalty trusts, business development companies, pricing on OTC Bulletin Board and OTC Pink Sheets are excluded from the above narrative.
Special thanks to Semir Krpo, David Krause, Niko Hahalis, Natalie Reale, and Mark Hammer for assisting in the drafting of this publication.
US IPO Services Leader, PwC US
Capital Markets Advisory Leader, Deals, PwC US
Capital Markets Research Leader, Deals, PwC US