U.S. IPOs Emerge as Unlikely Haven in Brutal Month for Stocks
(Bloomberg) -- Newly listed stocks provided a surprising source of gains during the U.S. market’s worst month since March of 2020.
Typically losers in a risk-off environment, New York’s initial public offerings instead delivered a rise of 25% on average during September’s selloff in the broader market.
Consumer-facing stocks such as Dutch Bros Inc. and On Holding AG that opted to go public during a highly anticipated return from the summer lull in dealmaking drove the outperformance. Investors bought the shares based on the combination of a spending rebound after the depths of the pandemic and the emergence of new technologies and styles drawing the interest of shoppers.
Among the winners, Dutch Bros rose 97%, On Holding gained 27% and beauty products maker Olaplex Holdings Inc. popped by 13% since their respective debuts in September.
“One of the big themes investors have focused on in recent months is increased consumer spending,” David Erickson, former co-head of global equity capital markets at Barclays Plc and now a lecturer at the University of Pennsylvania’s Wharton School, said in an interview. “This should also help companies like Allbirds Inc., expected in the near-term.”
Consumer cyclical IPOs raised more than $4 billion in September, according to data compiled by Bloomberg, the biggest monthly windfall since 2010. Alongside traditional IPOs, the frenzy for new stocks has also included the return of direct listings. Warby Parker Inc. as well as software maker Amplitude Inc. are both trading higher since taking the alternative route to public markets earlier this week.
Investors showed continued interest throughout the market swings, Clearwater Analytics Holdings Inc. Chief Executive Officer Sandeep Sahai said in an interview, despite questions surrounding the impact of uncertainty surrounding the finances of China Evegrande Group, a political deadlock in Washington and the ongoing pandemic.
“What’s going on is legacy technologies are being disrupted by new technologies in each and every industry,” Sahai said. “That’s why you’re starting to see all these companies come out with different tech, huge customer success and really strong organic growth.”
Clearwater, also a software company, is one of 20 September listings that are trading above their IPO price, compared to eight trading down. That stock was part of a swell of IPOs that priced above their marketed ranges, another sign of demand for the industry.
“As investors look beyond the pandemic, they are trying to spot companies that have arguably become stronger during the pandemic and due to the pandemic,” MKM analyst Rohit Kulkarni said in an interview last week.
These IPOs are part of a global surge of supply that’s also included more than $30 billion of secondary offerings in the U.S. alone in September. That’s the biggest windfall in more than a year, according to data compiled by Bloomberg.
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