The first half of 2018 brought a rebound in the IPO market not seen for the past 20 years, driven to large extent by an appetite for healthcare and technology stocks.
So far this year 120 companies have issued IPOs on U.S. exchanges raising a total of $35.2 billion, according to the Wall Street Journal citing Dealogic, which keeps data since 1995. In the past 12 months, more than 60% of the IPOs have been focused in healthcare and tech stocks, according to data from Renaissance Capital.
Confidence in a strong stock market is driving some of the increased activity, Michael Corbett, chief investment officer of Perritt Capital Management said. The firm focuses on micro and small-cap company investments between $500 million and $3 billion.
Corbett said analysts and observers could interpret that the IPO market's lopsided distribution in healthcare and tech stocks and a lack of smaller-cap IPOs just reflects where the market is now.
"We don't see companies going public in every industry. The excitement and strength in the market has been healthcare and biotech," Corbett said. "It will continue to be easier for companies like that to go public: it's not a vibrant environment across the board."
The second quarter saw 60 IPOs that raised a total of $13.1 billion, the highest flow of deals in three years with an average return of 28.6%, according to the second quarter review of Renaissance Capital.
Recent tech IPOs included DocuSign (DOCU) , which raised $629 million and GrafTech International (EAF) , which raised $525 million.
"U.S. companies really dominated in the second quarter," said Matt Kennedy, an IPO market strategist at Renaissance Capital LLC.
While the U.S. companies dominated the second quarter, more Chinese names are expected to go public in the second half of 2018.
The beginning of the second half of the year is expected to see a surge of Chinese companies filing for IPOs including Cango, an online Chinese car sales marketplace which plans to raise $300 million, and a planned $200 million tender for Rubius Therapeutics, a biotech company developing drugs for cancer and other diseases using genetically modified red blood cells, according to Matt Kennedy.
"Other rumored IPOs include Survey Monkey," Kennedy said.
Volatility caused by continued fears over protectionist trade policies and other international tensions could cool the IPO market, however he noted.
So far, though, Kennedy says, "it seems like there is no sign of slowing down."
-- By Martin Cassidy
