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The IPO Market is on Fire

Written by Monica Savaglia
Posted July 2, 2018 at 8:00PM

The 2018 IPO market is on fire right now!

When Dropbox IPO’d in March of this year, you could say it launched this year’s booming IPO market.

At least it gave other million-dollar companies the incentive to finally pull the trigger on their IPOs. A well-known company finally having a successful IPO started to put things into perspective for other companies debating going public.

The IPO market has been experiencing its busiest quarter since 2015. And the recent filings keep rolling in, which indicates that this market is only getting more robust.

According to Renaissance Capital, in the second quarter, 60 companies went public in the U.S. Those second quarter public offerings raised an amazing $13.1 billion. This was a little less than the first quarter, which had 44 IPOs raising $15.6 billion.

In June, bankers priced 28 IPOs, excluding eight offerings. In total, 36 IPOs came out of June. This was well above the average for June IPOs.

From 2001 through 2017, the median June average was 16.3 IPOs.

It’s the time to IPO. And it’s time to start paying attention to the companies that are going public.

The head of America’s equity capital markets at Bank of America Merrill Lynch, Jim Cooney, had this to say about the IPO market:

The reason [for the pace of issuance this year] has to do with market sentiment broadly, valuations and the consistent outperformance in the IPO market versus relatively inconsistent returns in the secondary market.

The uncertainties happening in the market right now continue to add fuel to the fire. And it's why the IPO market has been welcoming amazing returns and success this year.

The Tech Sector Has Become a Big Help

Michael Millman, the global head of technology banking at JPMorgan, said:

There is an evolution across tech companies as they have greater scale and growth visibility. As a result, an increasing number of companies are contemplating an IPO.

Tech companies are not only having successful IPOs but also experiencing a rise in shares even months following their IPOs.

According to data from Bloomberg, in 2017, there were 52 tech companies that IPO’d on the U.S. stock exchanges, and of those, more than 70% are trading higher than their IPO price.

As I mentioned earlier, Dropbox (NASDAQ: DBX) recently had its IPO. It was a huge success, and it’s still on a bull run. It opened this week at $32.25 on Monday, July 2nd. It IPO’d a little over three months ago with an IPO price of $21. That’s a 53.5% increase since the company went public.

And that company isn’t the only one, especially when it comes to tech companies.

Tech companies involved with the cloud or cloud computing continue to soar high in the market.

Let’s just take a look at two companies: Zscaler (NASDAQ: ZS) and DocuSign (NASDAQ: DOCU). Both companies IPO’d this year, and both are involved with the cloud in some shape or form.

Zscaler went public in March alongside Dropbox. The company priced its IPO at $16 and, on the day of its IPO, opened at $27.50. It closed its first day of trading at $33.00 — up 106% from its IPO price. You could say it was a successful IPO for the company.

Now, as of open on Monday, July 2nd, the company is trading at $36 — a 125% increase from its IPO price.

Zscaler provides cloud security worldwide. It has developed a software-as-a-service security platform that ensures security for users and devices to applications and services. There are two things to take notice of with Zscaler: It’s a cloud-based company, but it also provides security for the cloud.

DocuSign opened up on the Nasdaq at $29 per share on its first day of trading. It raised $629 million for its IPO. DocuSign provides digital document and signature authentication software.

DocuSign IPO’d on April 27, 2018, and its stock is still soaring. The company opened on Monday this week at $52.46, an 80.8% increase since it IPO’d.

Tech companies are doing great things for the IPO market right now. The sector is fanning a flame that is already huge.

In fact, a few companies that IPO’d in the past two months have seen over 100% in returns since:

  • HUYA Inc. (NYSE: HUYA) has a 174% return
  • CLPS Inc. (NASDAQ: CLPS) has a 146% return
  • Avalara (NYSE: AVLR) has a 122% return

All three of these companies fall under the tech sector. And all three are helping guide the IPO market into an even more prosperous rest of the year.

Twelve IPOs in the past week raised $2.3 billion, making it the busiest week of the year for the IPO market. June was a month to remember, but July could be right behind. IPO successes help other companies feel confident and secure with their filings and picking their IPO date.

July is expected to be just as robust as June was. From 2001 through 2017, the median average for July was 14.3 IPOs.

Usually the summer months are the slowest on the market, but nothing is slowing down the IPO market. It’s only getting hotter as more promising companies start publicly trading.

A lot of companies going public this year have strong financials and growth potential, which gives them the opportunity to succeed not just at their initial public offering but for the years to come.

Paying attention these IPOs and companies is going set you apart because you’ll be aware of them before they really take off.

Until next time,

Monica Savaglia

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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