• 314 days Will The ECB Continue To Hike Rates?
  • 314 days Forbes: Aramco Remains Largest Company In The Middle East
  • 316 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 716 days Could Crypto Overtake Traditional Investment?
  • 721 days Americans Still Quitting Jobs At Record Pace
  • 723 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 726 days Is The Dollar Too Strong?
  • 726 days Big Tech Disappoints Investors on Earnings Calls
  • 727 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 729 days China Is Quietly Trying To Distance Itself From Russia
  • 729 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 733 days Crypto Investors Won Big In 2021
  • 733 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 734 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 736 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 737 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 740 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 741 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 741 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 743 days Are NFTs About To Take Over Gaming?
Charles Benavidez

Charles Benavidez

Staff Writer, Safehaven.com

Charles Benavidez is a writer and editor for Safehaven.com. Charles is located in New York City and has over 5 years of experiencing covering financial…

Contact Author

  1. Home
  2. Investing
  3. Stocks

U.S. IPOs See Booming First Quarter

NASDAQ

After struggling for years, the U.S. initial public offering market finally appears to be hitting its stride, with a total of 43 IPOs fetching $15.6 billion in the first quarter—the most in three years, and nearly 60 percent more than the same period last year.

Even more remarkable is the fact that four of those were billion-dollar IPOs, more than the entire haul in 2017.

The first quarter is a historically slow period for IPOs, implying that the current run-rate is on course to exceed last year's tally of 181 companies.

The market has foreign players largely to thank for that, with half of the 10 largest listings being overseas companies.

(Click to enlarge)

Source: MarketWatch

Warming up to Chinese stocks

The technology sector bagged pole position with 40 percent of proceeds, more than twice as much as the healthcare sector despite the latter's 12 listings to tech's nine.

The market's ongoing tech lovefest seem not to have missed a beat, with technology IPOs racking up average returns of 26.7 percent vs. 12.6 percent for healthcare. Not surprisingly, the only three stocks in the out-of-favor industrial sector IPO’ed and were immediately hammered to the tune -28.6 percent.

Quite tellingly, 21 percent of Q1 proceeds were in Chinese deals.

China’s iQIYI Inc.(NASDAQ:IQ), a video-streaming platform a la Netflix (NASDAQ:NFLX), was the second-largest listing, raising $2.25 billion, behind only Brazil's PagSeguro Digital Ltd's (NYSE:PAGS) $2.3 billion. That's nearly the same haul as the $3.4 billion collectively raised by the 16 Chinese companies that listed in U.S. exchanges in 2017.

New York has for years been the favored home of China's new economy IPOs, and the trend will probably continue in the foreseeable future. That in part has to do with more easier and faster registrations by U.S. exchanges as opposed to strict and rigorous regulations in China. Many Chinese companies, especially unprofitable ones, do not make the cut to be listed on the Chinese A-Shares Market due to overly strict financial standards. Related: The American Dream Is Drowning In Debt

But the exemplary performance by U.S.-listed Chinese companies cannot be overlooked.

Although investing in many of these stocks has been a rollercoaster ride in the past, investors have increasingly been warming up to them as the U.S. market continues to overheat and valuations skyrocket. Popular Chinese ETFs including KWEB and GXI have easily outperformed the S&P 500 over the past 12 months.

KraneShares CSI China Internet ETF (KWEB) vs. S&P 500 Index(SPX) 12-month Change

(Click to enlarge)

Source: CNN Money

Favorable regulation releases pent-up demand

January 2018 was a truly exceptional month, with three dollar-billion IPOs and a total of $9.2 billion proceeds realized. That's 4.5x more than the average for the month, demonstrating a clear pent-up demand for the IPO market.

(Click to enlarge)

Source: Nasdaq

A favorable SEC-rule change in mid-2017 allowed companies to pursue offerings with greater flexibility under a new tax structure. Many companies pushed back IPOs to allow them to take advantage of the favorable climate, thereby creating a build-up in supply.

The IPO market could end up seeing much more activity as more overseas companies continue to favor a U.S. listing.

The rumor mills have it that Chinese Uber Didi Chuxing, as well as giant smartphone-marker Xiaomi, could be angling for a U.S. listing over the next couple of years. Both companies are valued at nearly $50 billion apiece, and will easily dwarf Alibaba's (NYSE:BABA) $25-billion IPO in 2014.

President Trump has lately doubled-down on a deregulation drive, which could help make U.S. exchanges even more attractive to foreign companies and drive higher IPO volumes.

By Charles Benavidez for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment