IPO proceeds slowed 50% in the third quarter as investors lost their appetite for high-risk companies
- Money raised by companies entering the public markets declined more than 50% in the third quarter, compared to the second quarter of 2019, according to data from Renaissance Capital.
- Initial public offerings raised a total of $10.8 billion in the third quarter, less than half of the $25.1 billion in proceeds during the second quarter.
- The dip in fundraising comes as investors appear to be souring on high-risk, high-growth companies with uncertain paths to profitability.
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2019's rush of initial public offerings is slowing down.Newly public companies raised less than 50% through initial public offerings during the third quarter than in the second quarter of 2019, according to data from Renaissance Capital. Advertisement
Thirty-nine companies raised a total of $10.8 billion in the third quarter, compared to the 62 companies that brought in $25.1 billion in the second quarter, the firm found. For comparison, IPO proceeds totaled $11.2 billion during the third quarter of 2018 and $13.1 billion in the second quarter.
"The third quarter started off in high spirits but ended with a hangover," Renaissance said in the report. "The combination of poor aftermarket returns and a dip in initial filings suggest that IPO activity will finish the year at a slower pace than previously thought, with greater price concessions on the part of issuers."Technology and healthcare accounted for more than 60% of all new offerings during the period thanks to an influx of biotech startups and US tech unicorns, Renaissance said.
The decline in fundraising comes as public market investors appear to be growing more hesitant to back high-risk companies with unproven business models."The two largest offerings were both high-growth, high-profile disappointments, with SmileDirectClub and Peloton raising more than $1 billion but falling on their debuts," the firm said in the report. Other billion-dollar IPOs including Uber and Lyft have also fallen bellow their offering prices this year. WeWork's postponed public offering suggests investors might done "overpaying for blazing-fast growth," Renaissance added. Advertisement
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