After a slowdown in the second quarter, the IPO market is back in full stride in the third quarter, with the most initial public offerings and the most $100-million deals since 2021.
"IPOs delayed by earlier macro headwinds were revived or even accelerated to take advantage of surging demand for new issues, resulting in a steady pickup through July, a more-active-than-usual August, and more robust deal flow in September," Renaissance Capital said in a report.
The 60 IPOs launched so far in the third quarter raised a combined $14.6 billion — way up from a quiet year-ago period that saw only $2.4 billion raised. It was also above the average $11.1 billion raised, the firm said. And the number of IPOs was well above the 10-year average of 46 per quarter.
Large IPOs such as Klarna Group, Figma, Bullish and NIQ Global Intelligence accounted for much of the quarter's rebound. Those four unicorns raised more than $1 billion each.
Of 60 total IPOs in the quarter, 23 raised $100 million or more.
"Renewed interest in growth stocks allowed many of these names to price above the midpoint, and while a few of the earlier IPOs had explosive debuts, like billion-dollar deal Figma's historic 250% pop (for a $500+ million IPO), more rational appetite prevailed towards quarter-end," Renaissance said.
Among other impressive debuts, crypto trading infrastructure and data provider Bullish went public at 37 and soared as high as 118. It closed at 68 with an 84% gain, and it was up more than 80% Wednesday. Figma has gained nearly 70% from its initial public offering.
Indeed, the big issuers averaged a 23% return for the quarter. But post-IPO performance has varied a lot. NIQ, for example, now trades below its 21 IPO price. Firefly Aerospace, a space rocket maker, is a few dollars under its 45 IPO price.
Smaller New Issues
Several high-flying microcaps inflated the broader third-quarter return to 31%. Eight of the 10 best-performing IPOs this quarter were small issuers, Renaissance Capital said.
Hong Kong-based financial printing firm Rich Sparkle Holdings, which went public July 8 at 4 per share, skyrocketed 789% through Monday's close. The new issue, which raised $5 million, benefited from business related to Hong Kong's IPO boom.
Two other Hong Kong companies, industrials Masonglory and Etoiles Capital Group, have more than doubled. Platinum Analytics Cayman, a Singapore-based fintech, is trading around 10 a share after going public at 4.
Because of the uncertainty around many new issues, IBD suggests investors avoid buying IPOs in their first days of trading. It's best to wait for an IPO base to develop and trade based on such a chart pattern.
IPO Index Outperforms
The Renaissance IPO Index climbed 17% in the third quarter through Monday, beating the S&P 500's 13.8% return. The Renaissance IPO ETF, which tracks the index, is up 17% for the year also. It was down as much as 28% earlier this year.
Some other facts and figures on the IPO market:
- The average IPO had an average first-day increase of 17.5%.
- Nearly two-thirds of the larger deals priced above the original range, the highest since 2020. Only 5.1% of all deals priced below the expected range.
- The industrial sector had the best Q3 return, as 11 IPOs averaged more than 76%. Communications Services (three IPOs) increased more than 63% on average. The tech sector had the most IPOs (17), raising $4.1 billion with an average share-price return of 27.5%.
- The health care sector had eight new issues, but drug developers remain largely absent from the market. Biotech LB Pharmaceuticals went public Sept. 11 at 15 per share. It continues to trade right around that level.
"With a solid quarter of activity behind us and more deals lining up in the pipeline, the long-awaited IPO pickup appears to be well underway, and solid returns, stable market conditions, and a robust private backlog bolster a strong outlook for the rest of the year," Renaissance Capital added.
