Boom or Bust? What’s Ahead for IPOs in 2019
At the end of 2018, the stock market contracted, but capital markets executives seem…unfazed?
According to Renaissance Capital, 190 companies pursued IPOs in 2018, raising $46.8 billion. The number of filers increased 19 percent and proceeds increased 32 percent over 2017’s strong results. After a selloff in the fourth quarter, newly listed companies underperformed and IPO issuances slowed.
Between the market movement, trade war and public battles between the White House and the Federal Reserve, you’d think that a tepid IPO climate is ahead. But capital markets executives surveyed in December are resilient, even optimistic, in the face of volatility.
Forty-two percent say IPO activity will increase in 2019, even though a majority expect a further market correction will occur this year.
Why are bankers so bullish even when expecting further market moves? The 2019 BDO IPO Outlook Survey, which polled 100 capital markets executives at leading investment banks in December 2018, suggests that the pro-business climate, strong performance of most IPOs and potential for long-term growth was keeping market worries at bay.
Enter the shutdown. The partial government shutdown that began at the end of 2018 extended to the Securities and Exchange Commission, delaying IPO plans for many companies. While companies may be delayed in their IPO journey, we anticipate many will be undeterred in their plans; while still others may be forced to seek alternative capital-raising strategies.
"It’s fair to say there are mixed economic signals. Market dips are generally followed by a rally, employment figures continue to be strong, and major players - like ride-share companies - still appear to be moving along in their IPO plans. But the government shutdown that lasted through the beginning of 2019 is an X-factor. With the SEC delays in completing reviews, Q1 results may lag, but long-term growth opportunities could still drive a comeback."
Capital Markets Partner
BDO USA, LLP