The paths for IPOs and secondaries diverged in 1Q16, as IPO issuance disappeared amid higher volatility while secondary issuance increased. Overall, only 11 companies came public in the first quarter (including blank check and closed-end funds), down 69% from 4Q15 and down 71% year over year. For secondaries, 100 companies raised capital in 1Q16, down 54% year over year but up almost 100% quarter over quarter.
The U.S. equity market was characterized by high volatility in 1Q16. This volatility was caused by concerns over growth in China; a plunge in the price of oil; and uncertainty over the direction of interest rates as the Federal Reserve hiked rates in late 4Q15.
That said, the broad market bottomed in the period from late-January to mid-February, and stocks recovered 10%-15% through the balance of the quarter. This optimism among investors was reflected in the trend for secondary issuance in March; secondaries were brought out at twice the pace of February.
Based on the recovery of stock prices and the price-per-barrel of West Texas Intermediate crude, falling volatility, and recent news that the Federal Reserve will most likely not be aggressively raising rates in 2016, investors are beginning to once again consider a risk-on me ntality. This could be a positive backdrop for IPOs through the spring and into the summer.
In the following tables, we list numerous companies that may be poised to enter the IPO and secondary markets.
Table 1 features companies that have filed with the SEC for IPOs. Currently, more than 200 have filed.
Table 2 lists several companies followed by Argus analysts that are exploring corporate restructurings, and which may include s plitting off divisions to investors through IPOs.
Table 3 focuses on the Oil noPrint Gas industry. During 1Q, numerous Energy companies issued secondaries to shore up their balance sheets as oil prices fell below $30 per barrel. Though prices have recovered to the upper $30s, they are still more than 60% below the highs of the summer of 2014. We think Energy companies with high debt may seek equity funding over the next 2-3 quarters.
Table 4 highlights Pharmaceutical/Biotech companies that have filed with the SEC for a potential IPO. Of the 11 companies that issued IPOs in 1Q16, six were from the Pharmaceutical/Biotech sector - including two that opened up sharply higher than their issue price: BeiGene Ltd. (up 20.7%, with lead underwriters of Goldman Sachs, Morgan Stanley and Cowen noPrint Co.) and Editas Medicine (up 12.5%, with lead underwriters of Morgan Stanley, JP Morgan and Cowen noPrint Co.).
Table 5 is an update of intriguing venture-backed private companies. None of the companies on our list raised additional capita l in 1Q16. Had they been forced to seek additional financing, they probably could not have maintained their previous valuations.
Source: Triad Securities, Argus Research
Source: Argus Research
Source: Argus Research, Bloomberg
Source: Triad Securities, Argus Research
Source: www.sharespost; Argus Research
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