May IPO Recap

At the Ipreo Blog, we do our best to highlight notable developments throughout all sectors of the new issuance market, but sometimes the market conspires against us.

When we checked in on May’s new issuance activity a few weeks ago, we touted Tech. Three IPOs had just landed, bringing its total to eight through the first four-and-a-half months of the year, a promising start for a sector that always attracts public attention, even without any huge names in the offing. We also pointed to the Tech IPOs in the backlog five as more evidence of the Tech sector’s rise resurgence. That number has since been upped to six, so maybe we were onto something.

Yet, despite our best efforts, we keep coming back to healthcare. And… Utilities?

May welcomed 17 IPOs for $4.4B in proceeds, which is as close as 2015 has come to matching one of 2014’s monthly outputs. Last year welcomed 20 May debuts, leaving 2015’s May just 3 issues down from the prior-year period. The Healthcare sector’s eight IPOs accounted for nearly half of all deals, while the largest debut came from Tallgrass Energy GP ($1.4B), only the second debut to exceed $1B this year.

There are two ways to look at the new issuance numbers: quantity and proceeds. Healthcare has recently been dominating the quantity game. With 28 IPOs thus far in 2015, they’re running away with it again, despite the fact that they’re 14 behind 2014’s record pace; Tech is a distant second, with only eight debuts through the first five months of the year.

As usual, though, the sector’s proceeds tend to be on the smaller side. Both the volume and small-size of Healthcare deals is likely due in part to the JOBS Act, which greased the wheels for smaller start-ups and biotech firms to make their way to market with fewer obstacles. Even the Inovalon Holdings’ relatively large debut, which ranks as the fourth-largest IPO of the year ($684.8M), is tempered by the general lack of large IPOs through the first half of the year. There have only been two $1B+ debuts I 2015, with both coming from the Energy sector (the aforementioned Tallgrass Energy GP, and Columbia Pipeline Partners ($1.2B)).

The year’s trend towards lower proceeds is one of the reasons that May’s six-month backlog is such a surprise. It’s not that its 50 IPOs mark a 48% decrease from this time last year; that’s par for the course for 2015. It’s not that Healthcare leads the way with 15 issuers awaiting their debuts; what else is new? It’s that the Utilities sector looks to be launching its first IPO of the year, with TerraForm Global’s relatively big $700M filing standing as the backlog’s largest. The heretofore quiet sector has three total IPOs in the backlog, which is already close to matching last year’s total of five.

Granted, $700M is nothing close to Alibaba’s 2014 wave-maker, but it is nearly double the next biggest IPO in the backlog. And it gave us a reason to talk about the oft-overlooked Utilities sector. So that’s something, right?