Renaissance Capital reported several record lows in their 2016 Annual Review of the U.S. IPO Market. A total of 105 IPOs were completed in 2016, raising $18.8 billion in proceeds—the lowest activity level since 2009 and the lowest proceeds level since 2003, respectively. The median deal size for 2016 IPOs was $95 million, which is attributed to the number of smaller biotech offerings in 2016. Only four IPOs raised more than $1 billion this year. Additionally, 2016 had the lowest number of IPO filings since 2009 with just 120 companies filing for an IPO, an almost 50% decrease from 2015.
Sector updates. The tech sector accounted for 20% of all U.S. IPOs in 2016, with only 21 offerings, raising $3 billion in proceeds. The lack of tech sector participation in the IPO market is attributed to the public-private disconnect on valuation. Renaissance reports that venture capital-backed tech companies chose to avoid public-market valuations and decided to remain private. Mergers and acquisitions provided quick exits for tech companies that had filed for IPOs. The healthcare sector remained dominant, accounting for 40% of all U.S. IPOs. Another year of elevated biotech activity contributed significantly to this year’s 42 healthcare IPOs, which raised $3.4 billion in proceeds. The financial services sector raised the most proceeds in 2016. The 15 financial services IPOs raised $4.3 billion in proceeds.
Private equity-backed IPOs. The number of, and the proceeds raised in, private equity-backed IPOs in 2016 are the lowest since 2009. However, PE-backed IPOs continue to perform better than the overall IPO market. The 30 PE-backed IPOs raised $8.8 billion in proceeds, with only five of the 30 finishing the year below the IPO issuance price.
Venture capital-backed IPOs. Venture capital-backed IPOs in 2016 also represent the lowest level of activity and proceeds since 2009. 42 VC-backed IPOs raised $3.5 billion in proceeds. 50% of these deals were biotech and only 10 deals raised over $100 million. The tech sector (historically comprised of VC-backed companies) contributed to the 56% decrease in VC-backed IPOs. As discussed above, the notable public-private valuation disconnect contributed to the lower IPO numbers.
As 2016 comes to a close, we will continue to monitor the U.S. IPO market and provide updates on this blog.