Going Public Report: First Half 2021

Robert Freedman, Amanda Rose and Ran Ben-Tzur are partners at Fenwick & West LLP. This post is based on a Fenwick memorandum by Mr. Freedman, Ms. Rose, Mr. Ben-Tzur, and James D. Evans.

A Record-Breaking First Half of 2021

Technology and life sciences companies continued to go public at an extraordinary rate in the first half of 2021 via initial public offerings, de-SPAC mergers and direct listings.

IPOs

IPOs outpaced the second half of 2020, which was previously the most active six months for the space since we began tracking in 2012. In H1 2021, there were 76 technology and 66 life sciencescompany IPOs in the U.S., compared to 48 and 65 in the second half of 2020, respectively.

With 32 IPOs in Q1 and 44 in Q2, technology IPO momentum built throughout the first half of the year. Life sciences offerings increased slightly throughout the first half of the year, with 31 IPOs in Q1 and 35 in Q2, still by far exceeding H1 2020 and several prior years’ offerings.

Mega offerings marked the first half of the year, with 17 companies raising proceeds of more than $1 billion, including one life sciences IPO. Technology IPOs saw deal sizes increase generally. Approximately 93% of IPOs raised more than $100 million in the first half of 2021, versus only 83% in
the second half of 2020. Almost 21% of tech IPOs raised more than $1 billion in H1, the same as the second half of 2020.

The pace and size of technology companies going public in the first half of the year was representative of the fervent interest in the sector and robust market conditions. We expect activity levels to remain high for the rest of the year and into next year as companies have the option to go public through a variety of different ways including IPOs, SPACs and direct listings.

We saw life sciences deals trend larger in terms of aggregate deal size compared to the second half of 2020. In the first half of 2021, more than 83% of life sciences IPOs raised $100 million or more, compared to approximately 77% of deals raising $100 million or more in the second half of 2020.

Nearly all of the IPOs in the first half of 2021 priced within or above-range—93% of technology offerings (down from 96% in the second half of 2020) and 94% of life sciences offerings (equal to the second half of 2020, also 94%)—indicating a continued strong market environment.

de-SPAC Mergers and SPAC IPOs

The de-SPAC (special purpose acquisition company) merger surge also continued: the number of tech and life sciences companies to go public via SPAC merger in the first half of 2021 increased 71 percent from the second half of 2020, and the number of life sciences de-SPAC transactions quadrupled. The 53 technology and life sciences de-SPAC mergers that closed in H1 by far exceeded the H2 2020 total of 31.

The number of SPAC IPOs continued to increase significantly in the first half of 2021, continuing a bullish streak. There were 362 across industries in H1 2021, versus the 247 in all of 2020 and 59 in all of 2019.

Direct Listings

The four direct listings in H1 2021 were double the number in the previous half year. They included Fenwick client Coinbase Global’s blockbuster Nasdaq direct listing which debuted on April 14, 2021, with the second largest market capitalization of any technology company ever at the time of its opening trade ($100 billion). Roblox Corporation, Squarespace and Fenwick client ZipRecruiter also completed direct listings in H1.

Outlook

The going public window was wide open in the first half of 2021 and July showed few signs of slowing down. The markets are showing resilience against the impact of the COVID-19 Delta variance and other challenges.

Despite the Delta variant likely impacting businesses and the economy on some level for the near term, we anticipate deal activity among technology and life sciences companies through the rest of 2021 to remain strong. We believe de-SPAC mergers and direct listings will continue to be an attractive way to go public, in addition to traditional IPOs, as companies weigh which option is best for them.

Life sciences companies are continuing to go public at a pace on track with last year, still by far exceeding many prior years as investor interest remains steady and the bull market continues.

SPAC IPOs and de-SPAC Mergers

This graph shows the total number of SPAC IPOs completed since 2016.

This graph shows the total number of U.S. and foreign technology sector de-SPAC mergers that closed in H1 2021 and H2 2020.

This graph shows the total number of U.S. and foreign life sciences sector de-SPAC mergers that closed in H1 2021 and H2 2020.

IPOs Completed

This graph shows the number of technology and life sciences IPOs completed during each quarter of
2012 through 2021 H1.

Size of Offerings, Final IPO Price

The following scatter graphs plot the size of technology and life sciences IPOs completed during the first half of 2021 and second half of 2020 based on the actual public offering price per share and number of shares offered.

IPO Pricing

The first two graphs show the percentage of technology and life sciences IPOs with a final price that falls above, within or below the estimated price range reflected in the preliminary prospectus in the first half of 2021 and second half of 2020. The second two graphs  show the percentage of technology and life sciences deals that closed up, down or flat on their first day of trading in the first half of 2021 and second half of 2020.

Price Changes Between the Estimated and Actual IPO Price

Estimating the offering price for the IPO in the preliminary prospectus and pricing the IPO upon completion of marketing efforts are processes that are equal parts science and art. These graphs show the median and average prices for technology and life sciences IPOs from the midpoint of the estimated price range reflected in the preliminary prospectus to the actual public offering price to the closing price on the first day of trading, for the first half of 2021 and second half of 2020.

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