The IPO business: This year was huge for initial public offerings, and 2015 may be even better.
With Juno Therapeutics' IPO on Friday, we will end one of the biggest years ever for IPOs, the biggest since 2000, which was the record year.
This year we saw:
1) The biggest IPO in history: Alibaba;
2) the biggest real estate investment trust (REIT) IPO ever: Paramount;
3) the biggest master limited partnership (MLP) IPO ever: Antero; and
4) we end the year Friday with a biotech company that will have the largest market cap ever bitoech: Juno Therapeutics.
Next year could be even bigger, with well-known names like Uber, Airbnb, Pinterest, and Box all waiting in the wings.
This year saw 275 IPOs, the most since 406 companies went public in 2000, according to Renaissance Capital, which manages the IPO ETF (IPO), a basket of roughly 60 IPOs. Total proceeds were $85.2 billion, with Alibaba roughly a quarter of that total ($22 billion).
Despite the spate of new issues, it's hard to argue the IPO market was overpriced—40 percent of IPOs priced below the expected range.
What stood out? That's easy: Health care, led by biotech (the most issuances in a decade), and technology, where words like cloud computing, big data, and social media all became common terms. China also thawed out with the Alibaba blowout, and Israel stayed in the game with MobileEye, one of the largest tech deals of the year. At the end of the year we saw new models in lending in the form of Lending Club and OnDeck.
What about 2015? The IPO market is fairly simple: It's the Church of What's Happening Now. Wall Street wants to take public companies that are growing.
Where to find that in 2015? It's technology again. I already mentioned some of the big names waiting to go public: Uber, AirBnB, Pinterest, and Box.
Other candidates for 2015: Yodle, Spotify, and Palantir.
That's just in technology; other potential IPO candidates include:
1) First Data, an electronic payments processor (owned by KKR);
2) Roku, owner of the famous set-top boxes;
2) Univision, a Spanish-language based media company; and
3) Ferrari (a spinoff of Chrysler).
In the consumer business, fast casual did well in 2014, with Zoe's Kitchen and Habit Restaurants. Several likely candidates for 2015 are high-end burger joints Smashburger (a candidate for several years) and Shake Shack, as well as Blue Buffalo, the largest maker of all-natural dog and cat food.
One sector worth watching again in the new year is health care, specifically biotech. Most sectors are driven by revenue and a real financial business, if not profits. That's not the case with biotechs; they are bought on hopes of breakthroughs and buyouts, and in 2015 cancer therapies of all kinds debuted practically every week.
Another reason we saw so many biotech IPOs is that the prices held up. The strong stock market is an important reason, but here's another: While we saw dozens of biotech IPOs, many (43 percent, according to Renaissance) came to market at prices below their expected range. That's good news for buyers.
Is anything in trouble? With yields potentially rising, that makes yield-oriented names such as master limited partnerships less attractive. There were plenty of MLPs in 2014, mostly in the oil and gas pipeline business, and I think the chances are we will see less of them in 2015.