August is traditionally deadsville for equity trading, but it's particularly dead for the IPO business. Everyone shuts down until September.
Not this year. Next week the IPO calendar is packed. Last year there were maybe three IPOs at the NYSE in the month of August. But this year, the NYSE had three this week alone, and at least seven IPOs next week:
- Cvent (CVT): Tech, event management software
- MiX Telematics (MIXT): Tech, fleet management software
- Intrexon (XON): Biotech
- Franks International (FI): Oil services
- World Point Terminals (WPT): Energy, oil terminals
- QEP Midstream Partners (QEPM): Energy, master limited partnership
- Independence Realty Trust (IRT): REIT
NASDAQ also has several IPOs, including Fox Factory (FOX)(suspension products) and YuMe (YUME) (digital advertising).
This is an unusual level of activity; in fact, we are on track for the best August for IPOs since the halcyon days of 2007.
- 2013: 16
- 2012: 7
- 2011: 4
- 2010: 13
- 2007: 16
Source: Renaissance Capital
And 2013 is shaping up strong for IPOs overall. There have been 118 IPOs through July, according to IPOFinancial.com. Last year, there was 87.
What's driving the IPO business?
First, stock market at new highs. NOTHING helps the IPO market like a hot stock market, and this is one of the hottest ever. Despite all the cynicism and outright hatred for the rally, higher prices attract investors and make it easier to float new stock. Period.
Second, hot growth sectors. Earlier this year the IPO market benefitted from dividend payers like Master Limited Partnerships and energy companies. They are still around, but there are other hot growth areas that are attracting attention: cloud computing is still hot, but now biotech companies are starting to show up, much of it in the field of oncology.
Third, Facebook (FB) getting back to IPO price. It just happened, and I am not claiming it is turning around the IPO market, but it is not lost on IPO followers.
Finally, what's the quality of the deals? It is not a runaway market. It is still clearly a buyer's market. Many are still pricing at the low end of the price talk, or even below it. David Menlow at IPOFinancial.com notes the valuation is still low: they're not, for the most part, overpricing.
However, there have been disappointments. From July 1 to today, there have been 24 IPOs; 10 of them are trading below their offering price. But there's four deals that are trading 30 percent above their offering price.