Wall Street eyes Uber, Airbnb after hot 2014 for IPOs

Traders work on the floor of the New York Stock Exchange. (Photo: AFP/Spencer Platt)

NEW YORK: Wall Street in 2014 enjoyed its best year for initial public offerings since 2000, thanks to the record-setting flotation of Chinese Internet giant Alibaba and a barrage of biotech deals. Activity was "uninterrupted" and proved largely immune to forces that at times rattled equity markets, Renaissance Capital said in a report this week.

"While various global events, such as Russia's incursion into the Ukraine and conflicts in the Middle East, caused nervousness in global markets, they largely failed to disrupt the US IPO applecart," Renaissance said.

Renaissance said there were 273 stock debuts in 2014, up 23 percent from 2013. Dealogic released similar numbers, counting 291 offerings, up 27 percent from 2013.

Analysts are gearing up for another heady year in 2015, citing a deep pipeline of securities filings from leading prospects and investor zeal for such hot names such as apartment rental website Airbnb and app-based taxi service Uber.

RAISING MONEY FOR GROWTH

New entrants to US equity markets raised US$85 billion in 2014, according to Renaissance, about 55 percent more than in 2013. "What is behind the growth is that companies are really growing and need more capital to continue to accelerate their growth," Bob Greifeld, Nasdaq chief executive, said on CNBC. "That is great for the overall economy."

The year 2000 remains the best on record for IPOs, with 406 offerings raising US$96 billion, Renaissance noted.

Paradoxically, while the US and China spar for the distinction of the world's biggest economy, the Chinese Internet marketplace Alibaba emerged as a key player behind New York's banner year. Alibaba in September became the biggest IPO in history, raising US$22 billion.

Besides Alibaba, nine other companies raised more than US$1 billion in 2014. They included Citizens Financial, a unit of British bank Royal Bank of Scotland, with US$3.0 billion gained, and Synchrony Financial, which was spun out of General Electric, with US$2.9 billion.

A big chunk of this year's IPOs came out of the health sector, with biotechs comprising 25 percent of total deal volume at 69 offerings, Renaissance said. Biotech offerings also accounted for eight of the top 10 IPOs in terms of return to shareholders. However, the health sector also was responsible for five of the 10 worst-performing new stocks.

In all, the average new stock finished 16 percent higher at the end of the year compared with its IPO price. That was well below the 40.8 percent gain in 2013.

Renaissance cited the sell-off in energy IPOs in the latter part of the year as oil prices tanked, as well as a correction in high-multiple tech stocks in March and April, for the year-over-year decline. Twice as many deals were postponed in 2014 compared with the prior year and 40 percent came to market below the proposed pricing range, the report said.

RESILIENCY TO HEADWINDS

Experts expect another strong year in 2015, owing to a heavy number of securities filings from companies disclosing plans to do offerings. Renaissance has a private company "watchlist" of 255 companies that could go public.

More than 80 percent are in the tech sector. The list includes web registration company GoDaddy and subscription-based music streaming service Spotify. "Overall positive returns and a large pipeline suggest that consistent deal flow should continue into 2015, tempered by disciplined pricing," Renaissance said.

"While IPOs in 2015 will have to grapple with a Fed ready to raise interest rates, a depressed energy sector and concerns over economic growth abroad, the US IPO market proved its resiliency this year, and has the potential to create another post-2000 record."

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