IPOs vs the virus

Some internet wandering led me to stumble on the following chart from PWC that left me a little dumbfounded, and prompted a stroll through some IPO facts and figures.

Who in their right minds would try to get their business listed on a stock exchange in the middle of a pandemic, and potentially in the teeth of a terrible recession? It turns out that 477 businesses did just that in Q3 this year, raising $116bn in the process.

According to EY “Q3 2020 was the most active third quarter in last 20 years by proceeds and the second highest third quarter by deal numbers”.

So where is this extravaganza of new listings? 23 of them turned up in London (details here at the LSE). The fun was mostly being had in the US. They were flying off the shelves at such a rate that the numbers are increasing by the day it seems. As of 24th November, 2020, according to stockanalysis.com: "There have been 401 IPOs on the US stock market this year, as of November 24, 2020. That is +81.4% more than the same time in 2019, which had 221 IPOs by this date."

Is there a spooky correlation between the number of people dying from respiratory illness and the volume of IPOs during the year? One for Tyler Vigen maybe...

Looking at that busy US IPO activity for 2019, (as at November 2020) 59% of the IPOs are higher than their initial listing price, 40% are lower. The top 10 are below:

IPO Date	Name	IPO Price	Current	Return
Apr 18, 2019	Zoom Video Communications	$36.00	$430.28	1095%
Jun 13, 2019	Fiverr International	$21.00	$200.00	852%
Oct 10, 2019	BioNTech SE	$15.00	$106.50	610%
Nov 21, 2019	SiTime	$13.00	$85.20	555%
Jun 28, 2019	Karuna Therapeutics	$16.00	$100.00	525%
Jun 6, 2019	GSX Techedu	$10.50	$63.90	509%
Mar 7, 2019	ShockWave Medical	$17.00	$98.64	480%
Apr 17, 2019	Turning Point Therapeutics	$18.00	$104.37	480%
May 2, 2019	Beyond Meat	$25.00	$140.96	464%
Dec 5, 2019	LMP Automotive Holdings	$5.00	$27.71	454%

The bottom 10 from 2019:

IPO Date	Name	IPO Price	Current	Return
Nov 8, 2019	ECMOHO Limited	$10.00	$1.43	-86%
Aug 15, 2019	9F Inc.	$9.50	$1.29	-86%
Feb 12, 2019	Anchiano Therapeutics	$11.50	$1.41	-88%
Nov 13, 2019	YayYo	$4.00	$0.4500	-89%
Feb 15, 2019	Stealth BioTherapeutics	$12.00	$1.30	-89%
Jul 31, 2019	Borr Drilling	$9.30	$0.800	-91%
Jan 4, 2019	China SXT Pharmaceuticals	$4.00	$0.290	-93%
Apr 5, 2019	Guardion Health Sciences	$4.00	$0.247	-94%
May 10, 2019	Sonim Technologies	$11.00	$0.585	-95%
Aug 1, 2019	Sundial Growers	$13.00	$0.241	-98%

2020 has been just as exciting. 61% of the new listing from this year are in the green, whilst 36% have lost money.

2020 top 10 IPOs:

IPO Date	Name	IPO Price	Current	Return
Aug 14, 2020	CureVac	$16.00	$85.06	432%
Aug 27, 2020	XPeng	$15.00	$72.17	381%
Apr 8, 2020	Keros Therapeutics	$16.00	$76.21	376%
Jul 17, 2020	ALX Oncology Holdings	$19.00	$82.28	333%
Feb 6, 2020	Schrodinger	$17.00	$67.65	298%
Jul 30, 2020	Li Auto	$11.50	$43.64	279%
Jul 17, 2020	Berkeley Lights	$22.00	$83.36	279%
May 22, 2020	Inari Medical	$19.00	$68.00	258%
Jun 5, 2020	Dada Nexus	$16.00	$52.03	225%
Aug 13, 2020	KE Holdings	$20.00	$62.97	215%

And the bottom 10:

IPO Date	Name	IPO Price	Current	Return
Feb 6, 2020	Casper Sleep	$12.00	$6.04	-50%
Jan 17, 2020	Velocity Financial	$13.00	$6.25	-52%
Sep 30, 2020	Boqii Holding	$10.00	$4.78	-52%
Feb 13, 2020	Muscle Maker	$5.00	$2.30	-54%
Feb 24, 2020	Zhongchao	$4.00	$1.82	-55%
Jan 30, 2020	AnPac Bio-Medical Science	$12.00	$3.49	-71%
Jan 17, 2020	Phoenix Tree Holdings	$13.50	$3.76	-72%
Jun 19, 2020	Progenity	$15.00	$3.64	-76%
Jan 17, 2020	Lizhi Inc.	$11.00	$2.48	-77%
Jun 30, 2020	Aditx Therapeutics	$9.00	$1.91	-79%

Exciting stuff, a bit racy for me.

The requirements for a new listing vary slightly from one exchange to another, as do the regulatory requirements. The LSE have a nice write up here and nicely summarised below. 

It all sounds like a nice wheeze to get some cash, perhaps the founders have the chance to offload some of their own investment tied up in the company. But a more sobering element is the cost. PWC again have a nice tool to allow a view of the potential costs.

As an example, a tech firm with revenues less than $100m wanting to list at a valuation in the range of $100m to $250m would end up having to hand over between $8m to $24m according to PWC. 

Some of these IPOs are SPACs - Special Purpose Acquisition Companies. There is a detailed and comprehensive write up from Harvard if these excite you. SPACs are companies with no commercial operations that are designed and built just to raise capital via an IPO. It then buys an existing business. They are known as "blank cheque" companies and have been around for decades, but the recent boom in IPOs have brought these to the public attention through some high profile listings.

I think IPOs are not for me, although one or two of the US businesses do look interesting. I prefer my investments to be a little less volatile.