The third quarter started off in high spirits but ended with a hangover. During the quarter, 39 deals raised $10.8 billion, down slightly from last year, but above the historical average.
Healthcare and tech companies again dominated IPO issuance, making up 62% of all IPOs due to biotechs and large US tech unicorns. Software unicorns Medallia and Cloudflare confirmed that there is still demand for high-growth tech stocks. On the other hand, the two largest offerings were both high-growth, high-profile disappointments, with SmileDirectClub and Peloton raising more than $1 billion but falling on their debuts. WeWork’s planned IPO turned into a highly publicized debacle that suggested public investors may finally be done overpaying for blazing-fast growth. First-day pops were relatively strong, but IPOs fell 12% on average from there to end the quarter with a 1% average return. The IPO Index slid 11%, and the combination of poor aftermarket returns and a dip in initial filings suggest that IPO activity will finish the year at a slower pace than previously thought, with greater price concessions on the part of issuers. We now enter the 4Q19 with several biotechs queued up and a few notable offerings on file, including jeans brand Madewell, waste management firm GFL, and Chinese education platform Youdao, but the vast majority of likely IPOs sit in our shadow backlog.
- 39 IPOs Raise $10.8 Billion in a Fairly Active 3Q 2019
- Activity Again Led by Tech IPOs and Biotechs, with Tech the Best-Performing Sector
- Average IPO Ends Flat as Stocks Fall in Aftermarket Trading
- SmileDirectClub and Peloton Trade Down After Billion-Dollar IPOs