Fundamental Analysis—Renaissance IPO Index

Figure 1.  Top 10 holdings of Renaissance IPO Index (source: Charles Schwab)

The Renaissance IPO Index is a portfolio of companies that have recently completed an initial public offering ("IPO") and are listed on a U.S. exchange.

Figure 2.  Recent IPOs are breaking down relative to the S&P 500

In [2], Bloomberg reported on 09/25/2019 that:

The 2019 class of IPOs includes a number of so-called unicorns, including high-profile market entrants like Uber Technologies Inc., Lyft Inc., and Pinterest Inc. Together, the unprofitable IPOs have already raised the most cash of any year since at least 2000, according to a Bloomberg analysis of listings worth $100 million or more.

In [4] , Financial Times reported on 11/22/2019 that:

But Bank of America investment strategist Jared Woodard offers a note of caution. 

“Just 14 per cent of US tech IPOs are profitable this year, the last time that happened was at the dotcom peak in 2000 and we all know what happened after that,” he noted.

Figure 3.  Unprofitable Companies Are Raising the Most IPO Cash Since the Dot-Com Era 

Figure 4.  The cycles of IPO risk (source: Bloomberg)

References

1. Renaissance IPO Index
2. Unprofitable Companies Are Raising the Most IPO Cash Since the Dot-Com Era
3. Goldman and Morgan Stanley expected to suffer IPO earnings hit (FT on 10/13/2019)
• The tough IPO market has broader implications, especially for banks such as Goldman and Morgan Stanley, who rely on investment banking for a higher percentage of their earnings than universal banks such as JPMorgan Chase and Citigroup.
4. A year in which the IPO market sobered up (11/22/2019)
• So far 38 IPOs have been pulled this year, according to data provider Dealogic, compared with just eight in 2017. WeWork is the highest-profile example.