Wall Street has seen some key records this year. While investors cheered the surge in benchmarks with S&P 500 (SPX) hitting 52-week and all-time record highs so far, 2014 also became a record year for initial public offerings (IPOs).
The U.S. IPO market was the biggest in 2014 since 2000 in terms of both value and number. The size was mostly boosted by the Chinese e-commerce behemoth Alibaba (BABA). Financial firms raised significant funds – the highest since 2008 – via IPOs in 2014. Meanwhile, Nasdaq was the most preferred option among US exchanges for launching IPOs.
According to IPO exchange-traded fund manager Renaissance Capital, so far 275 companies became publicly-traded on the US exchanges and have raised over $85 billion. Another report from Ernst & Young LLP notes that 288 IPOs this year raised $95.2 billion, up 54% from 2013. In fact, a report titled EY Global IPO Trends: 2014 Q4 also suggested that IPO activity globally was the best since 2010.
IPO activity is said to be uninterrupted as major global geopolitical and economic concerns failed to have an affect. Renaissance Capital stated, “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 U.S. IPO applecart.”
However, the massive volume and proceeds did not translate into being the most profitable year. The average offering return was at 16% in 2014, significantly lower than 41% in 2013. However, the gain was better than the S&P's 13% return year to date. Separately, we have varying figures from Ernst & Young, which took 288 IPOs into account and stated that averaged return was 17.1% year to date.
Thus, investing in the winning IPOs have been a prudent investment move this year. Before looking into the most profitable IPOs in 2014, let's look into the related developments.
Global IPOs & Financial Sponsors
Globally, 1,206 IPOs raised $256.5 billion in 2014, according to Ernst & Young. This marked a 35% increase in volume and 50% jump in value from 2013. Sectors trending on the global IPOs front were Healthcare with 193 deals raising $21.8 billion, followed by Technology with 167 deals collecting $50.2 billion and Industrials accounting for 142 deals that attracted $19.9 billion.
