US IPO Market Heating Up After Being Written off for Dead in 2017

The US IPO market is primed for its busiest week in over two years.

Major US exchanges and analysts had been viewing 2017 as a lost cause for initial public offerings (IPO), with the NYSE and others portending the worst market since the financial crisis. However, the doom and gloom has at least temporarily been put on hold with a plethora of IPOs slated to debut in one of the busiest weeks in over two years.

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Listings and IPOs have not been a strong suit over the past year, notably in the US market. However, an initial boost of confidence in markets following the incoming Trump administration has fully blossomed into a more salient IPO market in H1 2017. As such, more companies are looking to list on what has been billed as a strong market.

With markets operating at all-time highs, an influx of deals could be the best sign to date that the IPO market could be on the uptick after seeing a dismal 2016. The largest issuer in the US during 2016 was the New York Stock Exchange (NYSE), leading the charge with only 119.4 billion – in terms of IPOs, the exchange managed to raise only $13.1 billion, with its largest being ZTO Express with $1.4 billion. By comparison, Facebook’s (NASDAQ:FB) IPO in 2012 alone raised $104.0 billion.

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Improved prospects

2017 has been outpacing last year in terms of IPOs thus far despite seeing a noticeably different market. Whereas 2016 was defined by lingering pockets of low volatility and static markets, this year has been much more active with sizable swings and pricing action. Moreover, last year’s market woes were also feeding a narrative that cyclical trends were keeping companies out of the public markets.

Indeed, the bar is not set very high for besting 2016, having seen just 41 deals priced that raised $8.0 billion. With the specter of political uncertainty in the rear view mirror, listings have crept higher, a trend that looks to continue in H2 2017. That being said, 2017 has seen just 81 total deals so far, which lags behind 2013 and 2015.

This week’s listings are also poised to raise approximately $1.5 billion, making it the eighth biggest week of 2017 in terms of proceeds. Proponents of higher activity are pointing to an average return of 12 percent since publicly listing, citing a Renaissance Capital report. While there is still a lot of ground to cover for listings, it’s definitely a start and a needed reprieve from last year’s dormant IPO market – this week will see a total of ten deals alone.

“On balance, we have a fairly healthy market that people have been participating in. The class of 2017 is doing fine and there is encouragement by those giving advice to clients that this market is wide open,” explained Mark Hantho, Global Head of Equity Capital Markets at Deutsche Bank.

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