2018 US IPO Review

US IPO Market

2018 Annual Review

January 2, 2018

2018 IPO Market Hits a 4-Year High Despite Bad 4Q

2018 went down as a good year for the IPO market, even if it ended on a sour note. 190 companies went public, 30 more than 2017, and proceeds increased 32% to $47 billion. Biotechs raised more IPO proceeds than ever, capped with a record-setting offering from Moderna. Chinese issuers flocked to US capital markets with deal flow hitting an 8-year high, including multiple billion-dollar offerings such as Tencent Music. The year featured ten billion-dollar IPOs, led by AXA Equitable, though the wouldbe headliner of 2018, Spotify, went public with an unusual direct listing. Other well-known names included ADT, Dropbox, and Eventbrite. Issuance and returns were very strong until the fourth quarter, when a global selloff caused the average IPO return to plummet to -2%, with aftermarket returns of -17%. As a result, we enter 2019 on uncertain footing. On the one hand, this type of market shock normally puts a significant dent in IPO activity. On the other hand, after years of IPO rumors, Uber, Lyft and a large backlog of other unicorns are firmly indicating plans to complete some of the largest-ever IPOs. As long as the broader markets do not sink further, 2019 could still be a big year for proceeds if not for deal count.

Key Takeaways:

US IPO Count Rises 19% to 190 Deals, Proceeds Up 32% IPOs Average a -2% Loss; Strong First-Day Pop but Negative Aftermarket 10 IPOs Raise $1 Billion or More Healthcare, Tech, and China Drive Issuance 2019 Could be The Year of the Mega IPO

US IPO Activity

Proceeds ($ Billions)

$140 $120 $100 $80 $60 $40 $20

217 $43.1

196 $42.2

213 $48.9

31 $24.5

63 $21.9

153 125

$38.7 $36.3

128 $42.7

222 $54.9

275 $85.3

170 $30.0

105 $18.8

160 $35.5

190 $46.8

$0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Proceeds ($ Billions)

Number of IPOs

Data set includes IPOs with a market cap above $50 million, and excludes closed-end funds, unit offerings and SPACs. IPO data does not include Spotify, which completed a direct listing. Proceeds totals do not include the exercise of underwriter over-allotments. Source: Renaissance Capital.

*Exclusively for IPO Pro Users

About Renaissance Capital Renaissance Capital provides pre-IPO institutional research and management of the Renaissance IPO ETF (NYSE symbol: IPO) and the Renaissance International IPO ETF (NYSE symbol: IPOS). For more information, visit .

Page 1 of 25

US IPO Market

2018 Annual Review

US IPO Count Rises 19% to 190 Deals, Proceeds Up 32%

Key US IPO Statistics ? Activity

IPO Volume

2010

Number of Deals

154

Proceeds Raised (US$ in bil)

$38.7

Median Deal Size (US$ in mil)

$108

PE-Backed Deals

38

PE-Backed Proceeds (US$ in bil)

$9.6

VC-Backed Deals

61

VC-Backed Proceeds (US$ in bil)

$6.0

Source: Renaissance Capital.

2011

125 $36.3 $160

35 $20.4

51 $7.9

2012

128 $42.7 $124

45 $10.3

46 $20.7

2013

222 $54.9 $126

68 $24.5

82 $9.7

2014

275 $85.3 $100

71 $25.0

126 $35.3

2015

170 $30.0

$94 39 $11.3 85 $8.9

2016

105 $18.8

$95 30 $8.8 42 $3.5

2017

160 $35.5 $120

46 $13.4

61 $11.3

2018

190 $46.8 $108

44 $16.0

87 $15.0

The US IPO market continued to climb in 2018 as 190 IPOs raised $47 billion, 32% more capital than 2017 and a four-year high. By deal count and proceeds, 2018 was the third most active year in the past decade, behind 2013 and 2014. A surge of biotechs and foreign tech companies drove the increase over 2017; two-thirds of IPOs were either tech or healthcare. Foreign issuers made up 28% of US IPOs, the highest since 2010 and 7 points above the 10-year average.

The IPO market had been well on track to hit the 200-IPO mark until November, when the drop in the stock market and spike in volatility caused deals to push to 2019. Activity in the final two months fell by 66% compared to last year, after a 42% year-overyear increase in the first ten months. Additionally, the availability of large amounts of private capital likely continued to be a drag on IPOs, and fewer US tech companies went public than last year.

Venture capital and private equity each comprised about one-third of proceeds raised. Even with an uptick in billion-dollar IPOs, the median deal size fell to $108 million due to the flood of small biotechs.

*Exclusively for IPO Pro Users

About Renaissance Capital Renaissance Capital provides pre-IPO institutional research and management of the Renaissance IPO ETF (NYSE symbol: IPO) and the Renaissance International IPO ETF (NYSE symbol: IPOS). For more information, visit .

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US IPO Market

2018 Annual Review

IPOs Average a -2% Loss; Strong First-Day Pop but Negative Aftermarket

Key US IPO Statistics - Performance

2014

2015

Avg. Total Return

21.0%

-2.1%

Avg. First-Day Return

13.5%

14.3%

Avg. Aftermarket Return*

19.8%

-13.9%

Renaissance IPO Index

7.2%

-8.0%

S&P 500

11.4%

-0.7%

Russell 3000

10.5%

-1.5%

% Trading Above Issue at Year-End

59.3%

42.9%

% Deals with Negative First-Day Return

27.3%

27.1%

% Deals Priced Below the Range

40.0%

32.9%

*Return from the first-day close to year-end. Data through 12/31/18. Source: Renaissance Capital.

2016

25.5% 11.4% 14.3% -0.5% 9.5% 10.4% 69.5% 25.7% 32.4%

2017

25.9% 11.8% 13.2% 35.8% 19.4% 18.9% 63.8% 23.8% 25.6%

2018

-1.9% 15.7% -16.7% -17.1% -4.4% -5.2% 38.9% 24.2% 18.4%

IPOs were generally well-received initially. Very few postponed, only 18% priced below the range (the lowest in over 10 years) and three-quarters traded up on day one. The average first-day pop rose to 16%, the highest since 2013. However, market weakness at the end of the year caused aftermarket returns to decline to a multi-year low of -17%. The average total return of -2% narrowly beat the S&P 500 but was well below the five-year average of about 20%. The market's 4Q sell-off impacted every sector, but energy, industrials, and China were particularly affected.

Returns by sector varied widely. The sole Consumer Staples company, BJ's Wholesale Club, posted a strong 30% return. After that, Consumer Discretionary IPOs averaged 14%, entirely driven by cannabis grower Tilray; excluding it, the sector averaged a -4% loss as brands like Sonos and Yeti disappointed. The Healthcare sector averaged 0% as a number of high-flyers were offset by the roughly one-third of IPOs in the sector that returned -40% or less. Tech averaged 2%, weighed down by China and a few microcaps; US tech companies raising over $20 million traded up 24%. Energy underperformed for the fourth year in a row. Industrials, which had been the best sector in 2017, were at the bottom in 2018, along with the sole utility, Argentina's Central Puerto.

US IPO Returns by Sector

Consumer Staples (1) Consumer Discr (17)

Real Estate (6) Technology (52) Healthcare (76)

Financials (18) Comm Services (1)

Materials (2) Energy (7)

Industrials (9) Utilities (1)

-43.7% -44.2%

-30.0%

-13.5% -21.3%

-0.3% -2.1%

3.1% 2.2%

-50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0%

14.4%

20.0%

30.4%

30.0% 40.0%

Data through 12/31/18. Source: Renaissance Capital.

*Exclusively for IPO Pro Users

About Renaissance Capital Renaissance Capital provides pre-IPO institutional research and management of the Renaissance IPO ETF (NYSE symbol: IPO) and the Renaissance International IPO ETF (NYSE symbol: IPOS). For more information, visit .

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US IPO Market

2018 Annual Review

Healthcare and Tech Continue to Drive Issuance

Healthcare again topped IPO activity as the biotech boom stretched into its sixth year. The year's 58 biotechs included a handful of billion-dollar companies and raised a record-setting $6.3 billion. The tech sector jumped to 52 IPOs raising $18 billion, the highest amount since 2014, boosted by five billion-dollar IPOs from China and Brazil. One-half of the tech IPOs were foreign issuers, including many Chinese fintech and online media and services companies, while the number of US-based tech companies going public actually declined slightly. That said, the year saw a pickup in "unicorns" like Dropbox and DocuSign: 38 tech companies went public at valuations of $1 billion or more, almost double last year and a six-fold increase over 2016. Like last year, energy started strong early in the year but then petered out as oil prices softened. The Financials sector included the year's largest offering and a dozen regional banks. Consumer Discretionary featured several connected device makers and foreign education companies, along with one large retailer, airport shop Hudson.

IPOs and Proceeds by Sector (US$ Billion)

2014

2015

% of

% of

Sector Healthcare Technology

# $ IPOs # $ IPOs # 102 $8.7 38% 78 $6.7 46% 42 59 $34.1 22% 29 $7.9 17% 21

Financials

27 $13.9 10% 16 $1.3 10% 11

Consumer Discr 17 $3.7 6% 12 $3.1 7% 5

Industrials

14 $4.2 5% 7 $1.5 4% 10

Energy

29 $11.6 11% 10 $4.4 6% 4

Real Estate

9 $3.3 3% 5 $1.1 3% 4

Materials

7 $2.3 3% 5 $1.5 3% 2

Consumer Staples 2 $0.3 1% 3 $1.2 2% 4

Utilities

6 $2.1 2% 3 $1.3 2% 2

Comm. Services

1 $0.4 0% 1 $0.1 1%

-

Data through 12/31/18. Source: Renaissance Capital.

2016

2017

2018

% of

% of

% of

$ IPOs # $ IPOs # $ IPOs

$3.4 40% 47 $4.2 30% 76 $9.1 40%

$2.9 20% 39 $10.1 25% 52 $18.3 27%

$2.8 10% 21 $3.1 13% 18 $4.3 9%

$1.5 5% 12 $2.2 8% 17 $4.1 9%

$3.5 10% 10 $3.8 6% 9 $4.1 5%

$1.4 4% 14 $4.4 9% 7 $1.5 4%

$1.5 4% 7 $2.6 4% 6 $3.7 3%

$0.1 2% 6 $2.7 4% 2 $0.9 1%

$1.6 4% 1 $0.0 1% 1 $0.6 1%

$0.1 2% -

-

-

1 $0.3 1%

-

-

3 $2.5 2% 1 $0.0 1%

*Exclusively for IPO Pro Users

About Renaissance Capital Renaissance Capital provides pre-IPO institutional research and management of the Renaissance IPO ETF (NYSE symbol: IPO) and the Renaissance International IPO ETF (NYSE symbol: IPOS). For more information, visit .

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US IPO Market

2018 Annual Review

10 IPOs Raise $1 Billion or More

The year's 10 largest offerings raised $16.4 billion, 35% of 2018 proceeds. 10 IPOs raised more than $1 billion, the same as the past three years combined. In the past decade, only 2014 had as many billion-dollar IPOs. The 10 averaged a first-day gain of 15%, in line with the 2018 total; while muted initial returns are typical for large deals, 2018 surprisingly saw four deals pop more than 30% and two deals drop more than 10% in first-day trading. By year-end the largest IPOs had a -8% average return.

French insurer AXA spun out its US operations in the year's largest IPO. Foreign issuers represented six of the 10 largest, including all five technology companies; the other five each represented a different sector. Chinese streaming giants iQIYI and Tencent Music were spun out of Baidu and Tencent, respectively. Venture capital made a showing thanks to two China-based companies, marketplace app Pinduoduo and electric vehicle developer NIO. Two large and fast-growing Brazilian payment processors listed, PagSeguro and StoneCo. Spun out of Eli Lilly, top-performer Elanco initially popped 50%, the best first-day return for a billiondollar IPO since Twitter in 2013. Just one LBO made the list, ADT, which was also the group's worst-performing deal with a -57% loss at year-end.

The largest US listing by market cap was not an IPO: music streaming giant Spotify completed a direct listing on the NYSE, valuing the company at about $25 billion. It finished the year 24% below its first-day close due to a sell-off in streaming stocks, but its relatively low volatility meant that this non-traditional listing was generally seen as a success.

Largest US IPOs

Company

Ticker

Offer Date

AXA Equitable Holdings

EQH

PagSeguro Digital

PAGS

iQIYI

IQ

Pinduoduo

PDD

Elanco Animal Health

ELAN

ADT

ADT

StoneCo

STNE

VICI Properties

VICI

Tencent Music Entertainment TME

NIO

NIO

Data through 12/31/18. Source: Renaissance Capital.

9-May 23-Jan 28-Mar 25-Jul 19-Sep 18-Jan 24-Oct 31-Jan 11-Dec 11-Sep

Deal Size ($mm) $2,745 $2,266 $2,250 $1,626 $1,510 $1,470 $1,217 $1,210 $1,066 $1,002

Sector

Financials Technology Technology Technology Healthcare

Industrials Technology Real Estate Technology Consumer Discr

First-Day Pop 1.7%

35.8% -13.6% 40.5% 50.0% -11.5% 30.6%

4.5% 7.7% 5.4%

Return from IPO

-16.9% -12.9% -17.4% 18.1% 31.4% -57.1% -23.2% -6.1%

1.7% 1.8%

*Exclusively for IPO Pro Users

About Renaissance Capital Renaissance Capital provides pre-IPO institutional research and management of the Renaissance IPO ETF (NYSE symbol: IPO) and the Renaissance International IPO ETF (NYSE symbol: IPOS). For more information, visit .

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