Since October 1, 2019, 71% of IPOs have priced below the midpoint, compared to just 30% of IPOs in the first nine months of 2019. IPOs in the 4Q19 thus far have averaged a first-day return of 4%, down from 21% in the first three quarters of 2019. Investor caution has put increased pricing pressure on companies and deflated their first day returns. That valuation sensitivity has paid off in aftermarket trading: IPOs in the 4Q19 have averaged an aftermarket return of 7%, whereas those in the first three quarters averaged -13%.
With investors stung by high-growth, large-loss unicorns (e.g. Uber, Lyft, SmileDirectClub, Peloton), US tech IPOs have virtually disappeared in the 4Q19, replaced by biotechs and Chinese issuers with heavy insider buying. Even large defensive names aren’t immune: waste management firm GFL Environmental (GFL) postponed its $1.9 billion IPO this week after getting pushback on its valuation.
For more in-depth pricing and returns data, sign up for IPO Pro.
Below we highlight the pricing dynamics and average performance of IPOs in the first three quarters of 2019 versus in the fourth quarter to date.
| Characteristics of IPOs in the 9mo19 vs. the 4Q19 | ||
|---|---|---|
| In the 9mo19 | In the 4Q19 | |
| # of IPOs | 119 | 24 |
| Avg Offer Price vs. Midpoint | 2% | -9% |
| % of Pricings Below Midpoint | 30% | 71% |
| Avg First Day Return | 21% | 3% |
| Avg Aftermarket Return | -13% | 7% |
| Avg Return from IPO | 5% | 10% |
Sign up for a free trial of our premium platform, IPO Pro. Follow us on Twitter (@IPOtweet) and register for our updates on the IPO market.
