The market for initial public offerings on American stock exchanges recorded the highest volume since 2012 in the first half of this year.
A total of 120 companies raised $35.2 billion through initial public offerings (IPOs) on American stock exchanges. That makes for the fourth busiest year on record, according to Dealogic data reviewed by the Wall Street Journal. Dealogic began tracking the data in 1995.
The number of new IPO filings began to ramp up last year after the election of President Donald Trump. The president ordered the rapid reduction of regulations at the beginning of his term and cut taxes on corporations by the end of 2017. The actions created a favorable business environment and boosted the stock markets, the two conditions that bankers attribute to the IPO surge in 2018.
A wide range of companies issued IPOs as a result, including web-storage company Dropbox, leading home-alarm company ADT, and big-box retailer BJ’s Wholesale Club Holdings Inc.
“Our global IPO pipeline is stronger now than it’s been since the financial crisis,” said Evan Damast, global head of equity and fixed income syndicate at Morgan Stanley told WSJ.
The difference between valuation on the private and public markets, which was daunting in 2016, has largely disappeared. Companies who offered IPOs this year see their stocks trading at 22 percent above the offering price, on average. Technology companies are performing better than the rest, with stocks trading at 53 percent above IPO price.
Both the average and tech company price hikes are well above market performance. The S&P 500 is up 2% this year and the Nasdaq index is up 8.7 percent.
“This year we’re finding the investor demand for technology IPOs is literally the highest we’ve ever seen both in terms of the quantity and quality of interest,” said Madhu Namburi, JPMorgan Chase & Co.’s head of technology investment banking, told WSJ.
Bankers, who expect IPOs to continue heating up this year, foresee an even bigger 2019.
“There’s a real chance that 2019 could be even stronger than 2018,” said Namburi said