IPO First Day Bump by Year, Industry, and Lead Underwriter
I was speaking to a buddy the other day about the average IPO “bump,” meaning the performance of the stock on its first trading day. It seems like the stock (almost) always goes up a significant amount on that first day, and I thought it was more like 20% — 30%, compared to my friend who thought it was more like 10% — 20%. Then we got to thinking that it almost certainly depends on the type of company, so I did some research on the 3,571 IPOs over the last 20 years recorded on the Scoop Track Record page (it needed some serious data cleaning as well).
Overall, the Scoop database of IPO bumps has an average of 13.5% and a median of 4% (Tomer, you were right). This immediately tells us that we have a significant fat tail effect, as we can see in this histogram:
Now let’s take a look at the bump by lead underwriter (n>20):
I wonder why Goldman is so high on this list? Could it be because they tend to be more conservative with their IPO pricing? I would figure perhaps if there were extra demand for a Goldman IPO, they may price that in and the bumps would drop over time, but we don’t see that in this box plot:
I see that Goldman’s IPO sample is heavily weighted towards internet services/software and pharma/biotech (101 of a sample of 245), where I see major hits like Baidu (354%) and Seres Therapeutics (186%). Now let’s look at medians (circle with x) and confidence intervals that show the extent of the overall fat tail distribution. Most IPO bump industry medians hover between 0% and 10%, but there are enough outliers to swing averages to as high as 25% for Goldman:
By year we can see that IPO bump averages have held mostly steady around 11% (+/- 5%) except for outlier years 2000, 2008, and now 2020.
Now by industry (this took a little bit of work, and in a reasonable time I could only match about half of the original sample to a Tradingview industry). I am surprised that the food industry takes the cake here, anchored by massive successes like Beyond Meat (163%), Sprouts (123%), Shake Shack (119%), Potbelly (117%), and Noodles and & Co (104%).
With medians and confidence intervals:
Some example industry-specific results by lead underwriter:
If you would like to know more about a specific industry or underwriter, write a comment or send me a note and I’m happy to share. In case anyone would like this raw data, you can access the spreadsheet here.
