The IPO class of 2021 was littered with multi-billion dollar deals that made insiders rich. Companies like the Coinbase cryptocurrency exchange, the Robinhood trading app, automaker Rivian, and online gaming platform Roblox are among the biggest winners this year.
In many ways, this was a historic year for the US IPO market. Ninety-four companies went public in the third quarter, the busiest third quarter in 21 years.
“While the fourth quarter may not beat the record summer pace, 2021 will be the most important year on record for IPO capital and the busiest year in terms of transactions. since the dot-com bubble of 2000, “said William K. Smith, CEO and co. -founder of Renaissance Capital.
Another part of the US IPO market that has seen rapid deals are specialized acquiring companies, also known as PSPC. Five years ago, only $ 3.49 billion in 13 SAVS were raised. So far in 2021, 456 SAVS have gone public, raising a total of $ 130.29 billion.
Despite the frantic pace of new companies launched on the public markets, ETFs linked to new issues have shown mixed performance.
Year-to-date, the Renaissance IPO ETF (ticked by IPO) has slipped 2.25%, while the First Trust US Equity Opportunities (FPX) ETF has only risen 5.55% and Defiance Next Gen SPAC-Derived ETF (SPAK) fell 22.56%.
Of this group, the oldest is the First Trust fund, formerly known as the First Trust US IPO Index Fund. Launched in 2006, it tracks a modified value-weighted index of 100 listed IPOs in the United States. The index uses a 10% cap mechanism to prevent companies from dominating the underlying index. The main holdings within the FPX fund include Dell Technologies, Marvell Technology and Snap.
The Renaissance IPO Exchange Traded Fund is another choice for advisors looking to spice up their clients’ portfolios with newly formed public companies. The fund has also turned heads. It has generated successful returns over the past two years, gaining 34.56% in 2019 and 107.34% in 2020.
The 106-stock fund has almost 90% of its exposure focused on large-cap stocks, with the remainder going to mid-caps. His main titles include Moderna, Snowflake and Zoom Video Communications. The index is rebalanced on a quarterly basis and no stock is allowed to represent more than 10% of the overall portfolio.
PSPCs represent a larger share of the overall IPO market – the 2021 market has grown so large that it is now outpacing traditional initial public offerings. SAVS represent 64% of all IPOs in terms of number of offers and 52% of all IPO capital combined. This last figure is truly historic, as SPACs have never raised more capital than traditional IPOs at any time so far.
The Defiance SPAK fund, which tracks this market, celebrates its first anniversary this month. The fund is a direct play on the SPAC market and excludes traditional IPOs. Its main holdings are familiar SPAC names like DraftKings, Paysafe and Virgin Galactic.
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