U.S. IPO Market on Track for Slowest Month Since Recession

Recent Volatility Shakes Up IPO Market
  • Zero listings so far this month as volatility shakes stocks
  • One public offering planned for January already postponed

Zero: That’s how many initial public offerings have started trading on U.S. exchanges so far in 2016. At this rate, January is on track for the slowest month for IPOs since December 2008, when no companies filed after the bankruptcy of Lehman Brothers Inc.

Compare that to January 2015, when 19 companies listed on American exchanges. The busiest month in the past eight years was July 2014, when 54 companies started trading.

U.S. IPOs On Track For Slowest Month Since Recession
U.S. IPOs On Track For Slowest Month Since Recession

The culprit? Whipsawing equity markets have made it challenging to price public offerings. Volatility has intensified, driven by the slowing economy in China, a depressed commodities industry, turmoil in the high-yield bond market and lingering uncertainty around how higher interest rates will affect the financial system. The Standard & Poor’s 500 Index has plunged more than 7 percent to start the year, while the Chicago Board Options Exchange Volatility Index, a gauge of investor nervousness, is back above the troubling level of 20.

Elevate Credit, the online consumer loans company seeking to raise as much as $80 million in an IPO this week, delayed the offering, citing the “volatile” market. Only three companies are planning to price their offerings in the remainder of this month. Shimmick Construction Co. is aiming for an offering of as much as $81.25 million, Ameriquest Inc. for as much as $80 million and Advanced Inhalation Therapies AIT Ltd. for as much as $10.1 million.

Editas Medicine Inc., a gene-editing drugmaker backed by Bill Gates and Google Ventures, plans to raise as much as $106.2 million in a U.S. IPO, according to a Monday filing. The company has not yet set an expected pricing date, according to data compiled by Bloomberg.

The last company to debut on a U.S. exchange was China Customer Relations Centers Inc., which raised $9.6 million and started trading Dec. 21, according to data compiled by Bloomberg.

An IPO market recovery may take a while, said Tom Farley, president of NYSE Group Inc. “They will, by and large, IPO eventually. The question is when,” Farley said in a Bloomberg TV interview at the World Economic Forum in Davos, Switzerland. “It is likely a matter of months, not days or weeks.”

Private equity managers expect IPOs this year to fall “significantly,” according to a survey of 26 firms released this week by Ernst & Young and the Private Equity Growth Capital Council. One-fifth of the buyout firms with at least $20 billion under management, and 5 percent of smaller firms, see a public offering as the most attractive exit route in 2016, as opposed to selling a portfolio business to a company or another private equity firm.

(In a previous version of this story, the percentage of smaller firms in the final paragraph was corrected.)

(Updates with last U.S. IPO trading date in sixth paragraph.)
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