IPOs On Deck As US Market Reopens

There could be a rush of initial public offerings (IPOs) due to stalled deals amid the coronavirus pandemic, according to a report in the Financial Times on Saturday (May 23).  

In the past two weeks, six startups — including online car dealer Vroom and FinTech provider Shift4 Payments — filed for IPOs in the last month, according to data provider Refinitiv, as per FT. 

Backed by T. Rowe Price and Bill Gates, Vroom filed for its IPO on May 18 even though it had furloughed one third of its staff in May and levied pay cuts for everyone else. The company was valued at $1.5 billion after it raised $250 million in a private funding round last December. The startup’s net losses exceeded $140 million in 2019 on revenues of almost $1.2 billion. It started May with about $160 million.

Warner Music and the grocery chain Albertsons have filed paperwork and are pursuing an IPO sometime over the next few months.

The market for public equity sales “is picking up sooner than anticipated,” Neil Kell, chairman of global capital markets for Bank of America, told FT. “You’re going to see a wave of IPOs come to market that are larger rather than smaller because in volatile markets, investors want more liquidity. This is not a market where the marginal, smaller IPO will get done.”

The online insurance comparison platform SelectQuote raised $570 million last Wednesday (May20). Its IPO was the largest in the U.S. since February, and first-day trading closed up 35 percent. 

“We’re seeing signs of the IPO market reopening, and it is being led by growth equity,” said Paul Abrahimzadeh, co-head of North American equity capital markets for Citi. “With yields at record lows, capital that has the ability to flow between asset classes is moving into equities.”

This year has so far seen its lowest number of IPOs in four years — 34 companies raised $9 billion, according to Refinitiv data, per FT. 

The coronavirus-affected stock market has caused mixed results on retail IPOs in 2019. The big three initial public offerings — The RealReal, Chewy and Revolve — have either held their own against the storm or found some reason for optimism.