After a miserable 2022, the IPO market is alive and well and expected to improve into the third quarter, according to a midyear outlook from Renaissance Capital.
The firm, which tracks the IPO market, believes the summer IPO market will be productive, based on the larger May and June offerings and the lower volatility in the June deals.
Other catalysts include the Fed's pause on rate hikes, recent increased IPO returns, a backlog of good IPO candidates and an expected increase in listings.
The average U.S. IPO stock lost over 10% in the second quarter, but that was mainly due to a handful of underperforming microcaps. More important, the larger deals of over $100 million produced a solid 25% return above the offer price.
The Renaissance IPO Index, based on the Renaissance IPO ETF, gained 6.1% and was in line with the S&P 500's 6.2% second-quarter increase.
Year to date, the IPO ETF, which tracks the Renaissance IPO Index, has gained an impressive s28%. The ETF is in a bullish chart pattern, too, forming a cup-with-handle base.
Q2 Proceeds Pick Up
Twenty-three companies went public in the second quarter vs. 21 in the same quarter last year. Consumer and industrial companies dominated.
The Q2 deals collectively raised nearly $6.7 billion in proceeds, skewed to the upside by the $3.8 billion Johnson & Johnson spinoff of Kenvue. Total second-quarter proceeds were the highest in six quarters, even before the Kenvue deal.
IPO proceeds have been in the $2 billion range or lower for the last four quarters. The quarterly averages still pale next to the $15.9 billion 10-year average.
Consumer products company Kenvue — with its well-known Tylenol, Listerine, Benadryl and Neutrogena brands — was by far the largest IPO.
Only 10 companies came public using a special purpose acquisition company (SPAC) vehicle — the fewest in three years.
IPO Market Buzz
The second-largest IPO was specialty immunotherapy biotech company Acelyrin at $540 million. It went public May 5 at 18 per share. It's trading around 22 Tuesday.
Fast-casual Mediterranean restaurant chain Cava Group raised $318 million in its June 15 IPO at 22 a share — and the company is not profitable. Shares are trading around 46, making it the IPO market's winner. CAVA stock about doubled on the day it went public and is up more than 105% from the IPO price.
Cummins spinoff Atmus Filtration Technologies raised $246 million in its May 26 IPO at 19.50 per share. The stock is in the buy zone of an IPO base with a 22.50 buy point. Atmus makes filters for equipment and vehicles used in highway maintenance, construction, agriculture and mining.
The IPO pipeline has 148 companies looking to raise nearly $8 billion, Renaissance Capital says. Of 95 companies in the "active pipeline," technology (21), industrials (19) and consumer discretionary (13) account for the most.
Among the IPO filings are car-sharing platform Turo, Brazilian steakhouse chain Fogo de Chao and cosmetics and personal care products provider Oddity Tech.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
