Venture Capital: The U.S. IPO Drought May be About to End

May 26, 2020 | News, Venture Capital
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Companies will rush to list as coronavirus restrictions ease off.

As this is being written, the Dow is up nearly 600 points and the S&P 500 is above the psychological 3,000 mark. The markets are up as investors cheer the reopening of the economy and look forward to a vaccine that could mark an end to the suffering from the virus. Favorable and positive sentiments in the capital markets augur well for new capital issues. There are quite a few of these in the pipeline. These were on hold amidst the market plunge and lockdowns from the coronavirus outbreak. (PYMNTS.com)

2020 IPOs very few in number

Only 34 companies have floated IPOs in the U.S. this year and raised $9 billion – it’s the lowest amount since 2016 according to FT, which cited Refinitiv data.

[Of the 34, 20 are up and 14 are down from their IPO price. The 34 issues have delivered a return of 41.65% compared to the issue price versus a YTD return of 3.92% on the Nasdaq Composite Index.]

This low number may be about to change as six companies have filed for IPOs in the past two weeks.

These include online car dealer Vroom, fintech provider Shift4 Payments, Warner Music, and grocery chain Albertsons.

On an auspicious note for post-lockdown IPOs, online insurance comparison platform SelectQuote (NYSE: SLQT) raised $360 million last Wednesday (May 20) after pricing its shares above the targeted range. It is currently trading nearly 35% above the issue price of $20.

Medical device company Inari Medical Inc (NASDAQ: NARI) is currently trading at $43.70 after it priced Thursday at $19 each, raising $156 million. That’s a gain of 230%. The company was backed by Gilde Healthcare, Versant Ventures and U.S. Venture Partners among others.

“We’re seeing signs of the IPO market reopening and it is being led by growth equity,” said Paul Abrahimzadeh, co-head of North American equity capital markets for Citi, to FT. “With yields at record lows, capital that has the ability to flow between asset classes is moving into equities.”

Warner Music Group

Warner Music announced Tuesday that it hopes to sell stock worth $1.82 billion in a U.S. IPO at a target price of $23-$26 per share for 70 million Class A shares.

It hopes to price its IPO on June 2 with the stock to debut on Nasdaq the following day under the symbol “WMG”.

Related Story:   Who Will Dare to IPO After 2019’s List of Stumbles           

Image credit: Flickr                                    

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