As the markets try to shake off the coronavirus-induced uncertainty, initial public offerings are on the rise, and investors can capture the increase in IPOs through a focused exchange traded fund strategy.
Stacy Cunningham, president of Intercontinental Exchange Inc’s New York Stock Exchange, believed that initial public offerings have gained steam since the beginning of the coronavirus pandemic and the pipeline going forward looks strong, Reuters reports.
“It looks like it’s shaping up to be a very strong second half of the year,” Cunningham told CNBC.
Nasdaq Inc. has already pushed past the New York Stock Exchange in initial public offerings this year after the COVID-19 pandemic cut activity, the Wall Street Journal reports.
IPO activity plunged over March after the fallout from the coronavirus sent stock prices reeling and pushed a number of companies to postpone or terminate plans to go public. However, with the S&P 500 rallying in recent weeks, many companies have reassessed their IPO plans, which may revive the competitiveness for listings among the major exchanges.
“The NYSE is the world leader in capital raising, with more proceeds from IPOs and follow-on offerings than any global exchange,” John Tuttle, the NYSE’s vice chairman and chief commercial officer, told the WSJ. “Our leadership stems from our unwavering commitment to issuers and the ability to provide the very best marketplace for their shares.”
As IPO activity rebounds, ETF investors can also take advantage of the potential growth opportunity through a targeted IPO-related ETF, 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.
Another fund worth looking at is the First Trust US Equity Opportunities ETF (NYSEArca: FPX). FPX seeks investment results that correspond generally to the price and yield of an equity index called the IPOX®-100 U.S. Index, which seeks to measure the performance of the equity securities of the 100 largest and typically most liquid IPOs, including spin-offs and equity carve-outs of U.S. companies.
For investors seeking IPO opportunities around the globe, 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.
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