Wednesday, December 21, 2016

IPO Market Sluggish In 2016

With less than two weeks left in the year, it appears that 2016 will be a slow year for IPOs. Only 105 companies went public in the U.S., raising $18.8 billion, while 2015 had 170 IPOs that raised about $30 billion. The amount raised in 2016 was the lowest dollar amount raised since 2003. One potential reason for the slow IPO market is that many privately held companies have reached lofty valuations, with a growing number of unicorns and decacorns. A recent report argues that many of these private companies have lofty valuations that are not supported by public markets. If this is the case, the only way for investors in these companies to cash out with an IPO is by venture capitalists taking a potential loss on the IPO or waiting until the public stock market feels the valuation is in line with the company value.

Share Repurchases Decline

Even though companies in the S&P 500 repurchased $115.6 billion in stock during the third quarter, this actually represented a decline of 28 percent from the third quarter of 2015 and was the smallest quarterly repurchase since the first quarter of 2013. Apple led the way, repurchasing $7.2 billion of its stock, while General Electric repurchased $4.3 billion of its stock. The top sector for buybacks was IT, with $27 billion in repurchases, while the financials sector spent $25 billion on buybacks.