EY Report Suggests Improving Conditions for U.S. IPOs in 2018

Nasdaq Tower Nasdaq (Used with Permission Copyright 2014 NASDAQ OMX Group)

U.S. IPO activity has been ticking up, with 36 IPOs raising more than $12.7 billion in the United States so far this year, according to data released Monday by EY, the global consulting and accounting firm.

Although there are still several days remaining in the first quarter of 2018, EY reports the number of first-quarter IPOs is 44 percent higher than the 25 offerings that occurred in the first quarter of 2017. The $12.7 billion total raised was almost 17 percent higher than the $10.9 billion raised in IPOs nationwide in the same quarter last year.

The increase is encouraging because the first quarter is usually the slowest period for IPO activity, said Tim Holl, a partner in EY’s San Diego office. He added it was the highest number of first-quarter IPOs since 2014, according to EY data, and the most IPO capital raised in the first-quarter since 2015.

Tim Holl 2018 EY
EY San Diego Partner Tim Holl (EY photo used with permission)

Holl said he expects the pace of IPO activity to continue to ramp up in the second quarter, which in recent years has been the most-active quarter for U.S. IPO activity.

In a report released late Monday, EY highlighted its expectations for IPOs to come in 2018:

—Despite market volatility in early February, trading has stabilized in recent weeks on the Nasdaq and NYSE exchanges. EY said it sees signs of continued investor appetite for IPOs.

—So far, 28 companies have publicly submitted S-1 regulatory filings, including several high-profile technology issuers. Among the latter is Spotify, the online music platform that is expected to price its shares next week. With shares of the cloud-storage company Dropbox surging following its IPO Friday, EY suggests there could be a wave of “unicorn” IPOs—companies with valuations of at least one billion dollars— through the remainder of 2018.

—Interest in healthcare IPOs remains high. Holl noted that 11 of the first-quarter’s 36 IPOs were life science companies, including Menlo Therapeutics (NASDAQ: [[ticker:MNLO]]), Armo Biosciences (NASDAQ: [[ticker:ARMO]]), and Solid Biosciences (NASDAQ: [[ticker:SLDB]]).

—Recovering oil prices will support more energy-related IPOs. Six of the first-quarter IPOs were energy-related.

—Cross-border IPOs are on the rise, and EY reports more on the way. For example, Pag Seguro Digital (NYSE: [[ticker:PAGS]]), a Brazilian payment processing tech company, raised $2.3 billion in its IPO on the New York Stock Exchange, according to EY. Chinese issuers also are targeting U.S. listings, EY said.

—EY warned, however, that the IPO calendar in 2018 could wind down before the year ends, as issuers may scramble to go public before the mid-term Congressional elections in November.

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.