September Surge in IPO Activity Points to Fourth-Quarter Momentum

Despite another quarter of rising equity prices and falling volatility, IPO volume slowed during most of the summer. A late-September surge in pricing and filing activity, however, points to increased momentum in the fourth quarter.

Wednesday, October 25, 2017

Equity markets continued to climb during the third quarter. Solid corporate earnings and positive economic data outweighed a litany of negative headlines, including a series of devastating hurricanes and escalating tensions between the United States and North Korea. The Dow Jones Industrial Average, S&P 500, Nasdaq, and Russell 2000 all delivered positive returns for the quarter, and all four indexes were at or near record highs when the closing bell rang on the final trading day of September. The third quarter marked the eighth straight quarter of positive returns for the Dow, the first such streak in two decades.

While equity markets marched upward in the quarter, volatility continued to edge lower. Despite increasing geopolitical uncertainty, the CBOE Volatility Index (VIX) closed the quarter at 9.51, 15% lower than the beginning of the quarter and 32% lower than the beginning of the year. Low volatility and rising stock prices, however, were not enough to prevent net outflows of $46 billion from equity funds during the quarter, as investors weighed geopolitical risk and the likelihood of further interest rate hikes by the U.S. Federal Reserve.

Highlights include:

  • IPO market slows despite continued strong aftermarket performance
  • Backlog grows with increased September filings
  • Follow-on activity sees modest increase
  • Fourth quarter poised for uptick in activity

Volatility and IPO Filing Activity

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