Practical analysis for investment professionals
07 November 2013

Poll: What’s Behind the IPO Surge?

In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers what was behind the surge in initial public offerings in the United States.

The recent surge in initial public offerings in the United States:

Poll: What's Behind the IPO Surge?

It’s been hard not to notice the recent surge in initial public offerings in the United States. According to Renaissance Capital, the market for new issues in 2013 is on pace to be the busiest year since 2000, which marked the end of the dot-com IPO frenzy. The Wall Street Journal recently reported that, according to finance professor Jay Ritter of the University of Florida, the percentage of companies going public that are unprofitable is also at its highest level — 61% — since 2000. And in the past month, shares of sandwich shop owner Potbelly (PBPB), and storage and shelving purveyor Container Store (TCS), have nearly doubled since their public debuts, atypical performances for restaurant and retailing stocks. There is also renewed interest in the IPOs of Chinese firms, as evidenced by the soaring starts for the shares of Qunar Cayman Islands (QUNR) and (WUBA).

Despite what some might characterize as a building froth, only 28% of the 608 respondents to this week’s global poll consider this upswing in IPO activity troubling and indicative of a bubble. A plurality of respondents, 38%, attribute the strength to healthy capital markets and investor bullishness, and 26% simply see risk taking on the rise but, importantly, no cause for alarm. Approximately 8% of respondents cited relaxed capital raising rules, notably the 2012 JOBS Act, as the impetus behind the pickup in IPOs. Twitter (TWTR), scheduled to have priced their IPO yesterday, filed for their offering under the JOBS Act and the reception its shares receive will likely set the tone for the IPO market in the months ahead.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
David Larrabee, CFA

David Larrabee, CFA, was director of member and corporate products at CFA Institute and served as the subject matter expert in portfolio management and equity investments. Previously, he spent two decades in the asset management industry as a portfolio manager and analyst. He holds a BA in economics from Colgate University and an MBA in finance from Fordham University. Topical Expertise: Equity Investments · Portfolio Management

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