In the past three years, a biotech blitz has dominated the IPO market. Biotech offerings led to a 7-month stretch of 60+ IPOs (2Q13-4Q14), a level of deal flow unseen since 2000. Activity slowed considerably in 2015, and in the 1Q16, only eight deals (mostly biotech) got done, thanks to substantial insider buying.
Stripping out biotech deals, the 1Q16 was the third consecutive quarter of fewer than 20 non-biotech IPOs. That has occurred only twice in the past 20 years. The current dip is the result of a valuation correction that is far less severe than the tech bubble in 2000 or the financial crisis in 2008. Barring a major disruption to equity markets, we expect to see more than 10 non-biotech IPOs in the coming quarter based on prior cycles.
Looking ahead in the 2Q, SecureWorks (NASDAQ:SCWX), Bats Global Markets (BATS:BATS), MGM Growth Properties (NYSE:MGP) and US Foods (NYSE:USFD) each have prepped filings to break the spell. Private equity has so far held out for better valuations, though seven LBOs are in the US IPO pipeline for potential billion-dollar IPOs. More than 50 companies have reportedly selected banks or filed confidentially. However, biotech IPOs cannot be written off entirely; they have continued to offer VCs an IPO exit, and still make up much of the active pipeline.