While the steam may be coming out of an extended bull run in 2019, it’s been a white-hot year for initial public offerings, which has been fueling IPO-focused ETFs. In fact, there have been 16 IPOs that have already reached the $10 billion mark, particularly in the cloud computing space.
“There are 100 cloud categories that can do $1b in annual revenues,” said Jason Lemkin, an investor at SaaStr. “All the IPOs are on track to get that. All good ones at least.”
A trade impasse in the U.S.-China trade deal and fears of a global economic slowdown are causing markets to fret when it comes to allocating capital into equities, but that hasn’t stopped a red hot initial public offering (IPO) market. In fact, some analysts are making it known that an uptick in IPO activity has been correlated with downturns in the S&P 500 over a 12-month period.
For investors who want a piece of the IPO action, but don’t necessarily want to assume all the risk associated with investing in a single stock like Uber or Lyft can look to the Renaissance IPO ETF (NYSEArca: IPO). IPO seeks to replicate the price and yield performance of the Renaissance IPO Index, which is a portfolio of companies that have recently completed an initial public offering (“IPO”) and are listed on a U.S. exchange.
IPO is up 29.07% despite the market volatility that has racked the equities space due to the U.S.-China trade wars and inverted yield curves.
An International IPO Option
For investors seeking opportunities overseas, the Renaissance International IPO ETF (NYSEArca: IPOS) adds an international spin to the IPO market. IPOS tracks the rules-based Renaissance International IPO Index, which adds sizeable new companies on a fast-entry basis with the rest upon scheduled quarterly reviews. Current IPOS holdings include SoftBank Corp, Xiaomi and China Tower Corp.
Ridesharing IPOs like Lyft (LYFT) and Uber (UBER) may have sputtered off the starting line, but some IPOs like Slack are getting rave reviews from market analysts keeping an eye out on the latest offerings from Silicon Valley. Investors who haven’t warmed up to allocating capital into the IPO space can dip their toes in the water with ETFs.
Uber and Lyft aren’t the prime representatives of an IPO space that is actually hot to trot in 2019. According to data provider Dealogic, 25 tech companies have raised $19 billion via IPOs and overall, they’ve been generating returns of 34 percent on their first day of trading, which represents the best performance since 2013.
For more market trends, visit ETF Trends.