New: A weekly newsletter about the trends shaping cities

Stories

Despite big headlines, IPO activity has slowed in 2019

Stock information is displayed on a monitor at Nasdaq's office in Times Square. Photo: Drew Angerer/Getty Images
Stock information is displayed on a monitor at Nasdaq's office in Times Square. Photo: Drew Angerer/Getty Images

Multibillion-dollar stock market debuts from companies like Zoom, Uber and Pinterest have grabbed headlines in 2019 with eye-popping numbers, but new data shows IPO activity actually declined significantly this year, globally and in the U.S.

What's happening: Capital raised for both domestic and cross-border IPOs fell by 37% year-over-year, with volume down 34%, multinational law firm Baker McKenzie reports.

  • The decline from 2018's first 6 months was sharper than expected, with a total of $69.8 billion raised through June across 514 deals, the lowest for both measures since 2016.
  • Cross-border IPO activity fell particularly hard, with a 16% drop in volume and a 55% drop in value compared to 2018.
  • One asterisk to the numbers: the prolonged government shutdown that froze IPO filings for much of January.

Why it matters: A global slowdown in mergers and acquisitions, manufacturing and now capital generation and IPOs shows that 2019 has been an especially tough year for business.

  • The drop in cross-border IPOs may reflect yet another way commerce is being slowed by growing nationalism and fading globalization.

On the other hand: While 2019 has hardly been the best of times, Tom Rice, partner at Baker McKenzie, expects the second half of the year to show "some rays of light."

  • Rice says the U.S. stock market selloff in December coupled with the government shutdown — the longest on record, shuttering the SEC for more than a month — played a major role in the decline of both the number of IPOs and the amount of cash raised by businesses.

What's next? With those disruptions now in the rear-view mirror, Rice is confident the IPO market has strong momentum heading into the second half of the year, especially with the S&P 500 again nearing all-time highs and recent IPOs from companies like Fiverr, Beyond Meat and Chewy riding waves of bullish investor sentiment.

  • "Tensions with China may result in some slowing and more cautious activity in terms of capital formation by Chinese-operated companies looking to list in places like the U.S., but that’s only one piece of the action."

Watch this space: The one part of the world for which Rice does not have high hopes this year is Europe, where business remains paralyzed because of Brexit and the deteriorating economic environment.