After a global slowdown in the first half of 2020, IPO activity rose strongly in the latter half of the year and has continued to gain momentum. In the third quarter, the volume of listings doubled as confidence returned to the markets after an initial contraction caused by the pandemic. This uptick in IPOs has continued unabated. The primary winners were technology and health, but some unexpected sectors also emerged well from the crisis.
The Big Winners are Technology and Healthcare
In 2020, global IPO capital raising saw the highest activity in a decade. According to a report by Baker McKenzie, over US$331 billion was raised across 1,591 listings, which was a 42% increase in 2019.
The two sectors that have emerged the best are strongly influenced by the pandemic – technology and healthcare. Technology companies saw 257 listings and raised US$55 billion, an increase of 13% on the previous year. Healthcare companies likewise did well, raising US$33 billion from 162 listings.
US exchanges saw records broken after 454 offerings raised US$167.2 billion. According to Dealogic, the previous full-year record was US$107.9 in 1999 at the height of the dot-com boom.
The popularity of these industries is due to a global realization of how essential they are to modern life and how they will remain critical for the immediate future. The world relied heavily on technology during the pandemic and need healthcare to return to normal.
Interestingly, financial sponsor-backed activity remained relatively level. It was Venture Capital investment in technology and healthcare in particular that caused the record-breaking surge. The companies that went public in 2020 also did exceptionally well, with Reuters noting share increases of a massive 75%.
Another trend that shaped the market in 2020 was the increase in Special Purpose Acquisition Companies (SPACs) in America, resulting in the largest SPAC IPO ever seen. This has carried over into 2021, with Q1’s global IPOs raising US$202.9 billion from 727 listings, primarily spurred by SPAC IPO activity in the US.
Technology has been a hot sector for a while, but 2020 was particularly notable. Household names such as DoorDash and Airbnb went public, each raising over US$3 billion. In addition, tech companies such as Snowflake, Unity Software, and Palantir Technologies Inc., listed successfully and had a strong year. Palantir, for example, saw an annual return of 301%.
Biotechnology has Been Surprisingly Popular
Companies that make vaccines have obviously been popular, but the biotech sector as a whole has seen a surge in investment. Some of these companies are related to vaccines, such as Stevanato, which makes glass vials and is seeking a valuation of over US$7 billion. But it is biotech and research that have been surprise beneficiaries of the global shift in focus, as people are suddenly aware of the sector’s importance.
The majority of healthcare’s recent success has been attributed to biotech companies. In 2020, 78 biotech companies went public - a new record and a 77% rise from 2019. The extra funding has resulted in a surge in R&D, which will continue. The 2021 Life Sciences CFO Outlook Survey found 69% of life sciences organizations planning to increase R&D spending.
A great example of a young biotech company leveraging the influx of funding for research and rapid growth is Bright Minds Biosciences. The company develops next-generation therapeutics and were fortunate to be in the right industry at the right time.
CEO Ian McDonald explains, “Bright Minds was founded in 2017 based on the idea that psychedelic therapeutics can be improved. We put together a team of the world’s leading researchers in the field and set out to make next-generation pharmaceuticals that can be used by large patient populations. The therapeutics on the market and in development were not sufficient, and we were in a position to help.”
The company had made impressive progress, but biotechnology is an expensive field. “We have a very strong science team and a track record for getting game changing products to market. We were also developing a pipeline of best-in-class serotonin medicines and have a broad portfolio of new chemical entities. However, these all take time and, more importantly, funding,” McDonald said.
“When the pandemic arrived, funding suddenly flooded into the biotech sector. Our products help people deal with issues such as depression, PTSD and epilepsy disorders. The help we provide was, and still is, in high demand. As a result, we managed to raise US$30 million and established partnerships with leading research universities and the National Institutes of Health.”
McDonald is aware of the fortunate timing. “We were lucky to have made the progress we had when the pandemic arrived, as we could then use the extra funds to fuel research. The attention our sector is receiving has also made it possible for Bright Minds to become a public traded company earlier this year.
“The tragedy of the pandemic has meant an influx of funding. It has been an awful period but, thanks to a global shift in focus to the biotech sector, we can hasten the development of our products and research. We begin clinical trials at the start of 2022.”
The record-breaking trend for technology and healthcare IPOs has carried over into 2021 and looks set to continue. Although it has largely been the result of the pandemic, the investment in technology, healthcare, biotechnology and other sectors will hopefully benefit millions for many years to come.
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