Robust equity markets and high investor confidence are likely to spur some local companies to go public next year.
That’s according to Tim Holl, a San Diego partner with EY, who said the combination played a role in pushing the number of IPOs in the U.S. this year to its highest since 2014.
“Certainly, from an outlook perspective it’s positive for 2018 … we’ll continue to see activity,” he said. “When we look back on 2017 using Dec. 1 as a barometer, the companies that went public this year (nationally) are up on average 20 percent, so that’s a very positive indicator in terms of companies that went out and performed well.”
Locally, three San Diego companies went public this year, raising in total more than $300 million in their debuts. All were biotech firms.
The 2017 Companies
AnaptysBio and Tocagen raised $75 million and $97.8 million in January and April, respectively.
The third company to go public this year in San Diego, Odonate Theraputics, emerged from stealth mode in early December to announce its initial public offering.
Odonate, which has 44 employees, is developing an oral chemotherapy drug for patients with breast cancer. The company — the sole business to go public in the San Diego region in the second half of the year — raised $150 million.
The total Odonate raised was nearly equivalent to the total raised by the three San Diego-based companies that went public in 2016, which had collective proceeds of $154 million, according to EY’s data.
That’s larger than the typical offering for companies in that industry, Holl said.
Overall, health care companies represent about 25 percent of public markets.
“That’s where San Diego has been strongest,” Holl said. “I do think coming into 2018 we will see a strong market for San Diego companies.” That said, life science companies are always competing with others going public and those that are already public, he said.
However, the Nasdaq’s biotechnology index has risen about 20 percent over the year, he noted.
“It’s a very active market for life science companies, so I think that will be positive for (San Diego),” Holl said.
While the year isn’t quite over, typically markets slow in the last few weeks, so another company in the region going public before the calendar runs out is unlikely.
The annual invite-only J.P. Morgan health care conference, however, slated to be hosted early in the new year in San Francisco, often acts as a bellwether for the industry.
Leading the IPO Charge
After that concludes, companies that received positive indications from prospective investors tend to then lead the year’s IPO charge.
Outside of the life science industry, Holl said, companies are taking a bit more time to mature before moving toward an IPO.
That could be playing a role in the dearth of companies in San Diego outside of life sciences going public in the past year.
And some San Diego companies chose to go other routes to raise money, such as acquisition by private equity.
“It takes a company that wants to go public to go public,” Holl said.
Globally, EY data show there were more IPOs in 2017 than any year since 2007.
“The market is clearly out there now,” Holl said. The Asia region was the hottest in 2017.