United States: December 2015 IPO Market Review

Last Updated: February 19 2016
Article by David Westenberg

Originally published January 7, 2016

The December IPO market produced a pair of new offerings. Only once in the preceding 15-year period has the month of December seen a lower IPO count, as 2008 failed to produce a single IPO for the month in the midst of the financial crisis.

The year ended with 152 IPOs, a disappointing tally following the 244 IPOs in 2014. Setting aside 2008 and 2009, the 2015 total was, however, largely in line with the annual average of 157 IPOs that prevailed over the ten-year period preceding 2014.

Gross proceeds in 2015 were $25.17 billion, the third lowest annual total over the last ten years, and almost two-thirds below the $74.39 billion raised by IPO companies in 2014. The 2015 total was almost one quarter below the average annual gross proceeds of $32.92 billion over the ten-year period preceding 2014.

The low gross proceeds total for 2015 is partly explained by the high proportion of IPOs by life sciences companies, which typically have smaller offerings. Life sciences companies accounted for 47% of all US IPOs in 2015, up from 40% in 2014 and 28% in 2013.

The paucity of large IPOs in 2015 also contributed to the gross proceeds shortfall compared to prior years. There was only a single billion-dollar IPO in 2015 with a further seven raising gross proceeds of at least $500 million, compared to nine billion-dollar IPOs in 2014 with a further 15 raising $500 million or more, and six billion-dollar IPOs in 2013 with a further twelve raising at least $500 million.

Emerging growth companies (EGCs) accounted for all but ten IPOs in 2015, or 93% of the total, compared to 85% of all IPOs in 2014 and 82% in 2013.

The median IPO offering size in 2015 was $91.7 million, down 5% from $96.0 million in 2014 and the second lowest annual figure since 2000. The median offering size for IPOs by EGCs in 2015 was $81.0 million, compared to $450.5 million for non-EGC IPO companies.

The lower overall median offering size in 2015 reflects the higher proportion of IPOs by life sciences companies during the year. The median offering size for non-life sciences IPO companies in 2015 was $128.5 million, slightly above the $128.1 million median figure for non-life sciences IPOs that prevailed over the preceding five-year period.

Life sciences companies likewise impacted median annual revenue and profitability statistics. The median annual revenue of IPO companies in 2015 was $37.8 million—45% below the $68.2 million median figure for 2014 and 65% below the $108.8 million median figure for the five-year period preceding 2014. The median life sciences IPO company in 2015 had annual revenue of $0.1 million, compared to $120.1 million for all other IPO companies.

The percentage of profitable IPO companies declined to 30% in 2015 from 36% in 2014 and 46% in 2013. Only 6% of life sciences IPO companies in 2015 were profitable, compared to 53% of all other IPO companies. The latter figure is not dissimilar than the 57% that prevailed over the five-year period preceding 2015 for non-life sciences IPO companies.

The average 2015 IPO produced a first-day gain of 16%, the second highest annual average first-day gain figure since 2000 behind only the 21% average first-day gain figure for 2013. Over the course of the year, 26% of IPOs were "broken" (IPOs whose stock closes below the offering price on their first day), just below the 27% for full-year 2014, but slightly higher than the 25% figure that prevailed over the five-year period preceding 2014.

At year-end, the first-day gain for the average 2015 IPO company had been entirely erased with the average 2015 IPO company trading 0.4% below its offering price. The average 2015 life sciences IPO company was down 1% from its offering price while the average 2015 non-life sciences IPO company eked out a tiny fraction of a one percent gain.

All but one of the top ten performers at year-end based on percentage gain from offering price were life sciences companies. Seven of the ten worst performers were also life sciences companies.

While 28% of 2015 IPO companies were trading at least 20% above their offering price at year-end, 55% of the year's IPO companies were trading below their offering price and 68% of all 2015 IPO companies were trading below their first-day closing price.

IPO activity in December consisted of offerings by the following companies listed in the order they came to market:

  • Atlassian, a provider of enterprise software tools for project management and collaboration, priced above the range and produced a first-day gain of 32%.
  • Yirendai, a leading online consumer finance marketplace in China connecting investors and individual borrowers, priced at the midpoint of the range and ended its first day of trading down 9% from its offering price.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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