After a rocky start to the year, the Renaissance IPO Index, the underlying index for the Renaissance IPO ETF (NYSE Arca: IPO), rose 1.9% on Monday, marking its fifth straight day of gains and longest winning streak so far this year. The rally was cut short on Tuesday, as markets pulled back following hotter-than-expected inflation data.
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The IPO Index's recent upswing came amid strong trading from 2023 IPO and top 10 holding Arm (ARM), which soared after reporting earnings last week. Other positive drivers in the broader IPO market include solid performance from recent large issuers and declining volatility; the year's $100+ million deals average a 16% return from offer, and the VIX Volatility Index has remained in the low- to mid-teens for the past three months.
Despite the market pullback on Tuesday, we still believe there's reason to be optimistic about IPO activity going forward. Large deal flow has paused in the seasonally slow February period, but movement in the backlog indicates a pickup in March, which is expected to be led by the highly-anticipated IPO of social media platform Reddit.
