As highlighted in a post earlier this week, the IPO market has been heating up recently as some new issues have seen major rallies in the short period of time since they have come out of the gate.  The Bloomberg IPO index tracks the performance of stocks that have had their IPOs in the last year, and while the index is still 12% from its all-time closing high in November 2014, it did recently trade at a 52-week high for the first time in over 21 months (442 trading days).  Since the index’s inception in 1994, the current drought without a new high in the index was only the fourth time that the index went more than a year without closing at a 52-week high.  The prior three streaks ended in March 2002 (495 trading days), August 2009 (523 trading days), and May 2013 (551 trading days).  The first chart below shows the Bloomberg IPO index since the start of 1995, and the end of each streak is noted with a red dot. The second chart shows the S&P 500 over the same time period, and here each of the red dots represent the dates in the top chart where each of the prior streaks ended.

Looking at the performance of both indices when the prior streaks came to an end shows a mixed picture.  For the Bloomberg IPO index, the index traded down once (2002), sideways once (2009), and up once (2013).  For the IPO market at least, the fact that subsequent performance was so mixed suggests little in the way of any sort of bullish or bearish signal.  Looking at the S&P 500, its subsequent performance following an end to a long drought without a new high in the Bloomberg IPO index is a little more positive as the index continued to trade higher twice (2009 and 2013) and down once (2002).  However, in the one period where the S&P 500 declined, it cratered.  While the decline doesn’t look so bad in the long run chart, from March 2002 through the ultimate low in October 2002, the S&P 500 fell more than 47%!

Bloomberg IPO Index 082316

S&P 500 Index 082316

 

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