Overview
There were 37 initial public offerings in U.S. markets between January 1, 2020, and March 31, 2020. These 37 IPOs raised over $9.8 billion, an increase of over $2 billion from the same period last year and an increase of over $1 billion from last quarter. This was surprising, as market volatility has reached an all-time high since the 2008 financial crisis.
As shown in the graph below, the IPO activity this quarter was the third highest in terms of amount raised and IPO count in Q1 since 2016.
Industry Analysis
There were four unicorns this quarter: PPD, Inc. [PPD], GFL Environmental Inc., Reynolds Consumer Products Inc. [REYN], and Churchill Capital Corp III [CCXX.U]. All unicorns are American companies with the exception of GFL Environmental Inc., which is a Canadian company.
PPD, Inc., a contract research organization company, raised over $1.6 billion – topping the charts in terms of proceeds this quarter and ranking as the 65th highest IPO since 2000. GFL Environmental Inc., a waste management company, raised $1.4 billion, the second highest IPO this quarter in terms of proceeds, ranking as the 80th highest IPO since 2000.
Accounting and Legal Representation
The top IPO this quarter, PPD, Inc., was audited by Deloitte and represented by Simpson Thacher & Bartlett and Latham & Watkins.
GFL Environmental Inc., was also audited by Deloitte and represented by Stikeman Elliott and Davies Ward Phillips & Vineberg.
Auditor Market Share – All IPOs
Together, the Big Four audited 20 IPOs, or 54.1%, of the IPO market in Q1 2020.
#Auditor Market Share for 37 #IPO companies in Q1 2020
PwC [18.9%], Marcum [18.9%], Withum [18.9%], KPMG [18.9%], Deloitte [8.1%], EY [8.1%], and all other firms [8.1%]
— Audit Analytics (@AuditAnalytics) April 9, 2020
As shown in the table below, PwC, Marcum, Withum, and KPMG led with 7 IPO clients each, the most for all firms in Q1 2020. In terms of proceeds, Deloitte’s 3 IPO clients raised over $3.2 billion, the highest amount raised this quarter. PwC followed with a total of $2.1 billion from their 7 IPO clients.
Auditor Market Share – Excluding Blank Check Companies
Out of the 37 IPOs in U.S. markets this quarter, 12 were blank check companies. A blank check company is a development stage company that has no specific business plan or purpose, or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person.
The table below displays the auditor market share for IPOs in Q1 2020, excluding blank check companies. Without blank check companies, the Big Four holds the lead in terms of IPO count and amount raised. The Big Four audited 19 IPOs, or 76%, of the IPO market in Q1 2020. PwC still led with 7 IPO clients, the most for all firms in Q1. Deloitte also maintains its top spot in terms of gross proceeds with 3 IPO clients raising over $3.2 billion.
Emerging Growth Companies
33 of the 37 IPO companies, or 89.2%, elected to register as emerging growth companies (EGCs) in Q1 2020.
Conclusion
The IPO market started strong this quarter but quickly changed as the growing concerns of coronavirus (COVID-19) rapidly increased, creating market volatility at its highest level since the 2008 financial crisis. Interestingly, the IPO activity this quarter was still the third highest in terms of amount raised and IPO count in Q1 since 2016. It will be interesting to see if there are continuing impacts from the pandemic on IPO activity as the year progresses.
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