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IPO ETF Returns Double the S&P 500 in 1H: What Next?

Sanghamitra Saha

IPOs staged a great show in 2019, though January was freezing for the space. Government shutdown kept the space idle in January. With the SEC deferring the completion of reviews, Q1 IPO activity slowed a bit only to register a sharp rebound in the later months.

Biotech and tech unicorn IPOs have set the stage on fire. More than sixty companies went public in the first half. There were hot and sizzling public offerings like Uber UBER, Levi Strauss LEVI, Lyft LYFT, Pinterest PINS, Zoom Video Communications ZM and Beyond Meat Inc BYND.

Among the lot, CrowdStrike CRWD, Beyond Meat, Revolve Group RVLV, Chewy CHWY and Uberhave been performing well and are hovering at or near buy points, per In fact, Beyond Meat came across as the “biggest-popping U.S. IPO since 2000”. 

Overall impact on the market was 40.2% year-to-date gains in Renaissance IPO ETF IPO, up from the S&P 500’s 20.2% advancement.

What Lies Ahead?

Mid-July is going to seethe second-most busiest week of the year with nine diverse offerings and a direct listing scheduled. DouYu is set to be the year's largest Chinese issuer to debut in the U.S. markets, eyeing to raise $859 million, according to Renaissance Capital.

Three biotechs — Denmark-based Genmab, Fulcrum Therapeutics and Mirum Therapeutics —are also ready to go public this week. Two South American companies — Intercorp Financial IFS, which is one of Peru's largest providers of banking, insurance and wealth management services and Brazil-based medical education group Afya AFYA — are going to hit the U.S. market.

Two U.S. tech IPOs are also making their debut this week, with Medallia MDLA targeting $247 million at a valuation of nearly $3 billion. Built to optimize the patient check-in process at healthcare organizations, Phreesia PHR is raising $125 million at a market cap of $658 million, per Renaissance Capital. California-based RIA platform AssetMark Financial (AMK) and iHeartMedia (IHRT) are also on deck.

IPO ETFs in Focus

Against this backdrop, we expect the outstanding rally in the IPO ETFs to continue in the near term. This is especially true given that the market sentiments have been upbeat of late thanks to a dovish Fed.

Below we highlight a few IPO ETFs that could be on a tear in the near term.

Renaissance IPO ETF (IPO) – Up 40.2% YTD

The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed initial public offerings of companies whose unseasoned equities are under-represented in core U.S. equity indices. IPOs that qualify for liquidity & operational screens are added to the index at the end of the fifth day of trading, or upon quarterly reviews & discarded from the index after two years (read: S&P 500 Hits New High: 10 Top-Performing ETFs YTD).

First Trust US Equity Opportunities ETFFPX – Up 29.7% YTD

The underlying IPOX-100 U.S. Index is a modified value-weighted price index measuring the performance of the top 100 companies ranked quarterly by market capitalization in the IPOX Composite U.S. Index. The IPOX Composite U.S. Index is a rules-based value-weighted index measuring the average performance of U.S. IPOs during their first 1,000 trading days. It charges 59 bps in fees (read: Chewy's Solid IPO Puts the Spotlight on These ETFs).

Renaissance International IPO ETF IPOS – Up 20.2% YTD

The underlying Renaissance International IPO Index is a stock market index based upon a portfolio of non-U.S.-listed newly public companies, prior to their inclusion in global core equity portfolio. The fund charges 80 bps in fees.

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Renaissance International IPO ETF (IPOS): ETF Research Reports
First Trust US Equity Opportunities ETF (FPX): ETF Research Reports
Renaissance IPO ETF (IPO): ETF Research Reports
Uber Technologies, Inc. (UBER) : Free Stock Analysis Report
CHEWY INC (CHWY) : Free Stock Analysis Report
Levi Strauss & Co. (LEVI) : Free Stock Analysis Report
Beyond Meat, Inc. (BYND) : Free Stock Analysis Report
Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
Revolve Group, Inc. (RVLV) : Free Stock Analysis Report
Lyft, Inc. (LYFT) : Free Stock Analysis Report
Pinterest, Inc. (PINS) : Free Stock Analysis Report
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