Renaissance IPO Indices Cooled as U.S. Q2 2021 IPO Activity Fell 59% in the Wake of Regulatory Crackdown on SPACs

The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 8/30/2021, the Renaissance IPO Index was down 1.8% YTD, while the S&P 500 was up around 20%. Unfortunately, in sharp distinction to 2020, when IPOs were booming, this year turned everything upside down. 2020 could have easily been a terrible year for the IPO market, but it was far from it. It had a busy second half of the year, and for the full year there was a total of 480 IPOs (including SPACs).

Renaissance Capital has created an investment vehicle tracking its IPO index, known as IPO ETF (NYSE: IPO). Its top holdings include Snowflake (SNOW) and Palantir Technologies (PLTR). The Renaissance International IPO Index was down 12.1% YTD, while the ACWX was up 7.8%. Alongside U.S. domestic IPO basket, Renaissance Capital also has an international IPO ETF (NYSE: IPOS). It invests in public equity markets of the global ex-U.S. region and tracks its own underlying index, and top ETF holdings include EQT Partners and Smoore International.

Notwithstanding a less lustrous picture around fresh public companies’ price dynamics in 2021, proceeds from U.S. IPOs have reached $89 billion this year representing a 232% increase from the same time last year. According to BusinessInsider, the number of companies listing shares on U.S. exchanges for the first time dropped almost 60% in Q2 2021, as the boom in special purpose acquisition companies, SPACs, cooled sharply in the wake of a regulatory crackdown. Data from FactSet published last week showed that the total number of IPOs fell 59% QoQ, although they were 128% higher than a year earlier. The number of SPACs plunged 87%, raising just $6.8 billion compared with $92.3 billion in the first quarter.

It is fair to expect regular IPOs to catch up their original dynamics once the SPAC’s saga completely dries out the swamp it created. But before that happens we must maintain a rather conservative view on the whole story.