It was a tough second quarter for investors, as the S&P 500 ($INX) fell 12.5%. The driving factors include major debt problems in Europe and a fear of a double-dip recession in the U.S.
Despite all this, the IPO market recorded decent performance. According to a report from PricewaterhouseCoopers, the number of offerings nearly tripled to 39 and the total amount raised came to $5.1 billion. Overall in the first half of 2010, there were 66 deals, with $9.2 billion raised.
This is definitely a strong sign of resilience, coming after the severe correction in global markets.
So what were some of the other trends in Q2? And what can we expect going forward? Here's a look:
Losing Steam: It's still difficult to go public. Since May, 35 companies have either postponed or withdrawn their offerings. At the same time, many companies had to cut their IPO prices and number of shares issued.
Also, there has been loss in momentum. For example, there has been a decline in completed offerings for each month since April, going from 17 to 11. And there were 15 withdrawn or postponed offerings from May to June.
Performance: On average, the IPOs in Q2 posted a -11% return. There were a few strong gainers like Higher One (ONE), whose stock is up 22%. However, four offerings posted negative returns of 40% or more.
Amounts Raised: The sector that attracted the most IPO proceeds in Q2 was energy. Four offerings resulted in $1.3 billion in capital. The next on the list was technology, which saw 11 deals that raised about $778 million.
Next Half: As for the next six months, it does look like the IPO market will continue to encounter headwinds. The markets remain volatile and the negative returns for many offerings will certainly have a dampening effect. A stark reminder is the recent offering from Tesla (TSLA). After pricing its deal at $17, the stock shot-up to $30.42. But now the shares are trading at $15.34.
For the most part, the IPO market is likely to be more receptive to larger companies with proven track records. Examples include Toys R Us and HCA. What's more, China deals should also see strength.
Yet, there is still optimism: A whopping 68 companies have registered for IPOs in Q2.
Investing Like Warren Buffett
Learn from one of the world's best investors.View Course »