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IPOs keep rolling despite stock market volatility

Stock market volatility is supposed to be kryptonite for IPOs, causing issuers to hide out in their private market caves.

Yes, but: This is 2020, when nothing matters.


Driving the news: Lufax, a Chinese online lender, last night raised $2.4 billion in the year's second-largest U.S. IPO.

  • This capped off a week that also saw large floats from Root Insurance ($724 million), Leslie's Pools ($680 million) Allegro MicroSystems ($350 million),and Atea Pharma ($300 million). Each priced either at or above the top of its estimated pricing range.
  • And then there's what's happening in China with Ant Group, which reportedly has a record $3 trillion in retail investor bids for its IPO, slated to hit next week.

Between the lines: Each of the U.S. issuers intentionally planned to price into a presidential election whose outcome is uncertain — not just the victor, but even the process around determining the victor. And they kept marching forward as COVID-19 cases, hospitalizations, and deaths spiked and hopes for economic stimulus slumped.

  • Some of this can be explained by the old maxim about the strongest issuers being able to go public in any market, but that can't account for all 16 U.S. IPOs since the beginning of last week, let alone the successful SPACs.
  • One possibility is that the divergence of IPO performance and public benchmark performance has led some investors to believe IPOs are lower risk and higher reward. For example, Renaissance Capital's U.S. IPO index is up nearly 70% for the year, whereas the S&P 500 is up less than 3%.

But, but, but: There are some signs of mild softening. Three companies — AmeriHome, Caliber Home Loans, and Mavenir — each postponed expected U.S. listings this week.

The bottom line: IPOs show no signs of abating, no matter what happens in the broader markets or real economy, which should set up Airbnb and Doordash to list between Thanksgiving and Christmas.

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