For anyone who was anxious that U.S. investors would be bowled over in 2019 by the biggest crush of new listings in more than a decade, some news. You were wrong. So far.
Not only has one deal after another surged after pricing, but the market itself has shown no ill effects with billions of dollars of new equity sloshing around. In June alone, as the S&P 500 surged to records, 10 initial public offerings rose by 50% or more in their debut sessions, the most of any month since at least 2008. The average return of 37% is double gains earlier in the year.
“We’re partying like it’s 1999,” said Kim Forrest, chief investment officer at Bokeh Capital Management in Pittsburgh. “We’re bringing new companies to the public that we either use or we want to own.”
The RealReal rose as much as 50% in its debut
It’s an old saw of investing — bull markets end when supply overwhelms demand. While that may yet happen, June 2019 will not be the month in which this bull market is bloated out of existence. Companies have sold $40.25 billion in initial shares this year, the most since at least 2008.
“We look at that to try and gauge signs of froth. We’re nowhere near the excesses that we saw in 1999 and 2000,” said BTIG strategist Julian Emanuel on last week’s recording of Bloomberg’s “What Goes Up” podcast. “If you look at it in terms of the price, there have been winners and losers. It’s not all straight winners. They differentiate and it isn’t necessarily technology only that’s captured people’s imaginations.”
The buying spree in freshly minted IPOs expanded on Friday to include luxury reseller The Realreal Inc. and biotechnology firm Karuna Therapeutics Inc., which both surged by about 50% in their debuts.
The RealReal, the purveyor of $8,000 Oscar de la Renta jackets and $30,000 Hermes alligator handbags went public on Friday after its IPO priced above the offering range overnight. This latest round of bullish bidding helped RealReal and Karuna become the ninth and tenth U.S. IPOs since Memorial Day to surge by at least 50% in debuts, a feat accomplished just once over the first five months of 2019.
Friday’s trading follows two record-breaking debuts from Thursday’s session. Bridgebio Pharma Inc. opened 80% above its IPO price. Six minutes later, Adaptive Biotechnologies Corp. opened at nearly double its IPO price, surpassing CrowdStrike Holdings Inc. to become the year’s biggest pop from any sector. Other recent IPOs to surge in their first sessions include Chewy Inc., Revolve Group Inc., Fiverr International Ltd., Personalis Inc. and Stoke Therapeutics Inc.
One prominent tech company took a non-traditional route this month in going public without an actual IPO. Slack Technologies Inc., which makes software for workers to chat, directly listed its shares on the New York Stock Exchange, bypassing the usual fundraising process of an IPO. The direct listing allowed shareholders to sell right away without a lockup period.
“That’s a crazy one and it went off without a hitch, too,” said Bokeh’s Forrest.
