How you can play the hot IPO market

How you can play the hot IPO market

We've all heard about Twitter's highly anticipated initial public offerings. But Twitter is just one of many companies going public in the next few months. Meanwhile, this year has already seen a huge uptick in the amount of IPOs hitting the market.

According to data from Renaissance Capital, 169 companies have gone to market year-to-date. That's already one-third more the total for all of last year. As it now stands, 2013 has seen the most IPOs since before the financial crash of 2008.

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However, on average, this year's IPOs are the smallest they've ever been, averaging $240 million per offering. So, while more companies are going public, they're asking for a lot less money than before the crisis.

Year Companies Volume ($ billion) Average pricing ($ million)
2013 (year-to-date) 169 $40.0 $237
2012 128 42.4 331
2011 125 36.3 290
2010 154 38.9 253
2009 63 21.8 346
2008 31 24.5 790
2007 213 48.7 229
2006 196 42.1 215
2005 192 33.5 174
2004 217 42.6 196
2003 68 15.2 224

Source: Renaissance Capital

In 2012, half of all companies filing an IPO were either tech or energy companies. This year, health care and financial companies are in the lead, though tech and energy are not far behind. In both years, the four sectors accounted for three-fourths of all companies going public.

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The IPO market may be heating up this year but shares in companies going public are still notoriously difficult for the average investor to get their hands on. Is there another way to play the IPO market?

Kathleen Smith, Principal at Renaissance Capital talks numbers on the IPO environment, what's ahead, and her company's new product, an ETF that invests in IPOs.

[Disclosures: Renaissance Capital, the IPO Plus Fund (symbol: IPOSX) or the Renaissance IPO ETF (symbol: IPO), may have investments in securities of companies mentioned.]

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