Over the last two weeks, six companies have filed for a US initial public offering (IPO) which is higher than the total number of filings in April.
Fintech payments processor Shift4 Payments and online car dealer Vroom are among the companies that have filed for an IPO. Vroom is backed by Bill Gates’ Cascade investment office and T Rowe Price. It has furloughed a third of its staff of around 600 and cut salaries for the remaining employees due to the pandemic.
Investment bankers expect bigger companies to soon join the league and file for IPOs. Because of the slump in US stock markets, several companies including Airbnb shelved IPO plans. Airbnb, valued as high as $35bn last year, instead raised $1bn through a combination of debt and equity in April.
SelectQuote, an online insurance comparison platform, sold shares last Thursday, raising $570m. The IPO was the largest in the US since the start of February and shares in the company ended their first day of trading up 35 per cent.
According to Neil Kell, chairman of global capital markets for Bank of America, the market for IPOs “is picking up sooner than anticipated,” he told the Financial Times on Tuesday. He added, “You’re going to see a wave of IPOs come to market that are larger rather than smaller because in volatile markets investors want more liquidity. This is not a market where the marginal, smaller IPO will get done.”
US stock markets have bounced back sharply from their March lows. The Nasdaq Composite Index is now positive for the year while the S&P 500 looks set to move above the crucial 3,000 level today.
Equity market volatility has also come down. The Cboe’s Vix index that measures volatility and is also known as the fear index has fallen below 30 from a high of 85 in March.
Paul Abrahimzadeh, co-head of North American equity capital markets for Citi, said: “We’re seeing signs of the IPO market reopening and it is being led by growth equity.” He added: “With yields at record lows, capital that has the ability to flow between asset classes is moving into equities.”
US IPO flotations have been subdued this year amid the pandemic. Only 34 companies have floated an IPO so far in the year raising $9bn. Last year, during the same period, companies raised $25.5bn led by two fintech platforms. Uber raised $8bn giving it a value of $82bn last May and Lyft, which raised $2.3bn giving it a value of $22.3bn last March. However, Lyft stock is down more than 50% from its IPO price while Uber is down almost 23%.
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