Appetite for US IPOs set to return in second quarter

A handful of companies on Friday filed to go public, bolstering expectations of a strong second quarter for the US listings market after the float of Snap, the owner of the messaging app.

The market for initial public offerings is heating up after a slow period. With 111 deals, last year was the weakest one for US IPOs since the aftermath of the financial crisis in 2009, according to Dealogic.

A rally in the underlying market that has sent major US benchmarks to consecutive highs and a strong performance for IPOs is enticing companies to list again. The S&P 500 has gained 5.5 per cent in the first quarter, while IPOs are up 11.8 per cent, according to an index calculated by Renaissance Capital that tracks big listings of the past two years.

On Friday, low-cost carrier Frontier Airlines; tech “unicorn” Cloudera, a big data company backed by Intel; Carvana, a used-car platform; Emerald Expositions Events, a trade show operator; and China Rapid Finance, a lender, filed paperwork to go public.

“There was some hesitancy that we saw last year that carried over,” said Matthew Kennedy, an analyst at Renaissance Capital, which runs IPO-focused exchange traded funds. “As more companies go public successfully, more will file. It is a positive feedback loop.”

The deals in the pipeline represent a wide array of industries as evidenced by the companies that filed on Friday.

The second quarter is seasonally busy for the IPO market, but Mr Kennedy said this year the market could accelerate more than usual also because some technology companies may have waited for the Snap IPO to wrap up.

As the largest tech deal in the US since Alibaba, the Chinese ecommerce giant, in 2014, Snap gained attention for its March listing which gave the company a market value topping $20bn.

Its shares are up about a third from the IPO price of $17.

Other successful deals this year include Canada Goose, the maker of luxury outerwear; and Mulesoft, a software unicorn. Unicorns are companies that have achieved valuations of $1bn or more before tapping the public markets.

Deals in the energy sector, which has faced falling oil prices, have struggled, however. Keane Group, an energy services company, closed on Friday at $14.30 versus its IPO price of $19.

In the first quarter, 29 companies listed, up from nine in the first quarter of 2016 when the equity market sold off on falling oil prices and concerns that slowing economic growth in China could spread around the world.

The article Appetite for US IPOs set to return in second quarter was originally published at FT.com.