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U.S. IPO Market Buzzing Hot: ETFs to Tap the Boom

Sweta Killa

After a slowdown in January, the U.S. IPO market heated up with the long-anticipated IPOs of Levi Strauss LEVI and Lyft LYFT in late March. Both the companies had a blockbuster debut with LEVI surging 32% in first day of trading on the New York Stock Exchange while LYFT advanced 21% on Nasdaq.

The iconic jeans maker Levi priced its IPO at $17 per share, above its target range of $14 to $16, valuing the company at $6.6 billion. Meanwhile, the ride-hailing startup priced its shares at the high-end of its target range of $72 with a total valuation of $25.4 billion in the largest public offering so far this year (read: Top ETF Stories of March).

Tradeweb Markets TW, an electronic exchange-trading platform, also made a strong debut earlier this month on Nasdaq, surging 27% in its first day after pricing its shares at the high-end of the target range of $24-26 with a valuation of $8 billion. It is the second largest public offering of this year so far. The cloud-computing company, PagerDuty (PD), also popped nearly 60% in its opening day of trading this week. It was the third "unicorn" or tech company with a valuation of $1 billion or more – to debut on the stock market this year.

PagerDuty priced its IPO at $24 per share, above the target range of $21-$23, which values the DevOps software platform at $1.8 billion.

Hot IPOs In Cards!

The other big companies like Pinterest, Zoom and Uber are preparing to hit the markets in the coming weeks. In particular, Pinterest, an online photo-sharing platform, is looking to debut under the symbol "PINS" on the New York Stock Exchange next week. It has set its share price at $15-$17 that is likely to value the company at $9 billion. At this IPO price range, the company will be valued below its last private fundraising round about two years back.

Video conferencing company Zoom is also expected to debut next week on the Nasdaq under the symbol “ZM”. The company has set an IPO price range of $28-$32 per share, giving the company a valuation of $8.25 billion toward the upper end of its range.

Uber Technologies has filed for IPO with the New York Stock Exchange under the symbol “UBER”. This global ride-hailing startup is looking for a valuation of $100 billion with a potential price range of $48-$55 per share and could be the biggest IPO since Alibaba Group BABA went public in 2014 (read: Get Over Lyft Flop, Tap Uber IPO Euphoria With These ETFs).

Other hot IPOs this year include online marketplace and hospitality service company Airbnb, the workplace messaging app Slack, secretive data analytics and intelligence firm Palantir Technologies, no-fee trading platform Robinhood, food delivery app Postmates, and shared office space startup WeWork.

How to Tap?

Investing in multiple IPOs at the same time can be a difficult task; however, investors can easily tap the IPO resurgence with the two domestic-focused ETFs discussed below:

Renaissance IPO ETF IPO

This fund provides exposure to the largest and most-liquid newly listed companies by tracking the Renaissance IPO Index. New companies seek inclusion on a fast entry basis on the fifth day of trading. The fund currently holds 71 stocks in its basket, with each accounting for less than 7.1% exposure. Technology is the top sector accounting for 34.7% share while communication services and real estate round off the next two spots with double-digit allocations each. The fund has amassed $35.5 million in its asset base while it trades in a light volume of about 14,000 shares, probably implying additional cost beyond the expense ratio of 0.60%. The product has surged 32.9% in the year-to-date period (read: Uber, Lyft, Slack, Pinterest, Other Hot IPOs & ETFs: What You Need to Know).

First Trust US Equity Opportunities ETF FPX

This ETF focuses on the largest, best-performing and most-liquid U.S. IPOs and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holding after trading for a minimum of 100 days. In total, the fund holds 100 securities in its basket with the largest allocation going to the top firm with 9.2% share while other securities hold no more than 4.71% of the assets. The product is tilted toward information technology at 34.5%, while healthcare and consumer cyclicals round off the next two with double-digit exposure each. The fund has accumulated $1.1 billion in AUM and witnesses volume of about 103,000 shares per day. It charges 59 bps in fees a year and has gained 21.9% so far this year.

Bottom Line

Considering the most anticipated offerings of this year, investors looking to take advantage of new growth stocks should definitely bank on these two ETFs. The huge success of the new listings and a boom in IPO would further fuel the funds.

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