Tracking the year in the IPO market is a momentum game. Week to week, month to month, quarter to quarter, we watch to see if steam is building, things are chugging along, or if roadblocks – political turbulence, regulatory changes, summer vacations – cause things to slow down.
2018’s IPO market had its fair share of momentum, managing to stay immune to the turbulence of the stock markets, which experienced their choppiest year since 2008. The spring and early summer months, before the dog days of August arrived, were particularly strong, and August’s vacation weeks saw a less drastic drop-off than in years past. Unfortunately, even without a huge plunge, the last few months of the year weren’t able to bring things back up, and the fourth quarter ended the year on a down note, significantly dampening 2018’s totals as a whole.
Throughout the year, IPO deal count and proceeds were strong, at least until the last few months, marking the second most impressive figures seen during the first three quarters since 2001.In fact, the first three quarters of the year were some of the busiest from an overall standpoint since 2001 (705 total deals for $213.3B in total proceeds), making the final quarter’s slump all the more disappointing as the falling fortunes of the U.S. stock market finally seemed to affect the new issuance market.
September brought the IPO market back from vacation with a bang, bringing 22 IPOs to market and helping maintain the quarterly momentum after the second quarter’s strong showing, thanks largely to June’s big results. At the end of the month, the backlog showed a 52.0% decline from the $8.5B in proceeds seen in the third-quarter backlog for 2017. Despite that, October remained strong, bringing in 22 IPOs to 2017’s 17 in the same month.
But there were signs that, despite the robust performance in quarters two and three, the fourth quarter might falter, and with the arrival of November and December, that’s exactly what happened. Both months saw a decrease in total debuts and proceeds from the year prior, with November bringing six to market (with the lowest average monthly proceeds count since February 2008) and December barely besting it with seven debuts. The most notable being Tencent Music Entertainment Group’s $1.1B in initial debut, which helped raise the proceeds total to a respectable $2.1B.
Sector-wise, the fourth quarter was the same old story. Healthcare led all sectors with 62 deals for total proceeds of $9.2B, extending its streak to 23 straight quarters. The Technology sector brought four of the top 10 largest IPOs during the quarter, including StoneCo Ltd.’s quarter-leading $1.4B debut, which cemented the sector in second place in both proceeds and deal count in Q4 (19 deals for $6.2B). The biggest mover in 2018 was Utilities, which, after bringing six total deals for $1.9B in 2017, witnessed 28 deals for $24.0B in 2018, representing a 366.7% rise in deal count and a 1,187.3% surge in terms of proceeds. It was also the only space in 2018 to welcome 10 different $1.0B deals to the market.
The current backlog indicates that the general market uncertainty that 2018’s IPO market mostly circumvented is making its mark on 2019. The number of deals in the backlog is largely unchanged from the same period a year-ago, dropping from 31 to 28, but expected proceeds have fallen off a cliff. Just $3.1B in proceeds are currently expected, representing a 77.7% drop off from the $11.3B expected at the same time last year. A singular deal is expected to reach the $500.0M in proceeds mark (IPSCO Tubulars Inc.), but the remaining 27 are all expected to price below the $300.0M threshold.
Get all the details on the fourth quarter’s new issuance activity in the full Ipreo Quarterly US New Issuance Recap Q4 2018