After two lackluster weeks, the IPO market is looking to make a comeback, with nine companies expected to raise $1.2 billion in public offerings next week. Four energy companies, three medical and two Chinese internet companies are expected to debut.
“These companies will be facing a harsh IPO market environment,” warns Kathleen Smith, principal at IPO investment advisory firm, Renaissance Capital. “Investors have become more price sensitive because returns on recent IPOs have underperformed the market.”
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Since April 10, the last 20 IPOs have all priced below the mid-point of their proposed ranges, according to Renaissance data -- 75% were priced below their expected ranges.
The year was off to a strong start, with the U.S. on track for the best IPO year since 2000. Then after five weeks in a row with IPOs raising at least $1 billion, last week only saw $40 million raised and this week saw $354 million, according to Dealogic.
Companies rose an average of 23% on IPO day in March, but were up only 9% in April. The average first day pop was 17% last year.
Finance has led IPO volume this year, with 15 companies raising $6.5 billion. Technology has seen 19 companies raise $5.2 billion and healthcare has seen 43 IPOs raise $3.1 billion.
The Renaissance Capital ETF (NYSE:IPO), which recently began tracking IPO performance, is down 5% this past month.