On the surface, it's been nothing short of awful this year. Only 59 initial public offerings have priced, that's about half what it normally would be.
"The IPO market is half a heartbeat away from getting out the paddles," David Menlow of IPOfinancial.com quipped.
But IPO watchers are hopeful that the fall will see a flurry of activity, for three reasons:
- The markets remain near historic highs;
- IPO returns have begun outperforming the markets, and
- the presidential election will likely dampen activity in November, so companies thinking about going public might move in September and October.
Despite the dearth of IPOs, the returns on what has gone public have been improving. After lagging most of the year, the Renaissance Capital IPO ETF, a basket of the 60 most recent, largest IPOs, is up 8.3 percent this quarter, outperforming the S&P's 6.8 percent gain.
Bottom line: The IPO market has been lousy for issuers, but it's been improving for investors.
What are investors clamoring for in IPOs this fall? What they want is growth. Remember, this is an era where a lot of companies are growing earnings through financial engineering like buybacks but have no real revenue growth. Companies with revenue growth are in demand.
You can see this in the IPOs that have done best so far this year:
All tech companies, all with growth.
Let's look at IPO hopefuls for the second half. There is not much on the calendar, but there are roughly 100 companies that have filed a public S-1 statement and could go public fairly quickly.
Growth can be found in two sectors: technology and consumer.