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Sept. 29, 2020, 1:18 p.m. EDT

IPO market is headed for busiest third quarter since the dot-com years

Palantir Technologies and Asana are expected to go public on Wednesday via direct listings

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By Ciara Linnane, MarketWatch


AFP/Getty Images
The IPO market has been charging ahead this quarter

The U.S. initial public offering market is expected to see 11 deals and two direct listings this week, adding fuel to what will be the biggest third quarter since the dot.com era.

Data-mining-software company Palantir Technologies /zigman2/quotes/221054928/composite PLTR -0.91%  and workplace collaboration and planning software provider Asana /zigman2/quotes/221282045/composite ASAN -0.13%  are expected to go public on Wednesday via the first direct listings of 2020, according to media reports.

Palantir is expected to list with a market value of nearly $20 billion, the Wall Street Journal reported. In a direct listing, a company floats existing shares on an exchange and lets the market decide the price. Palantir’s bankers have told investors the shares could start trading around $10 a pop, the paper reported.

Asana is expected to list with a market value of more than $5 billion, according to Renaissance Capital, an operator of IPO exchange-traded funds and provider of institutional research.

“Recent software IPOs have outperformed, although direct listings historically haven’t seen the same enthusiasm: last year’s sole direct listing, Slack Technologies /zigman2/quotes/212180539/composite WORK -4.83% , last closed up 5% from its reference price, while 2018 direct listing Spotify /zigman2/quotes/207488629/composite SPOT -3.93% saw little action until soaring more than 100% in the 2Q as usage spiked during the pandemic,” Renaissance Capital co-Founder and Chief Executive Bill Smith said in commentary.

See: Palantir plans to go public as it moves away from reliance on government work

The IPO market is ending the busiest third quarter for deals since 2000, with 81 IPOs expected to raise $28.5 billion, according to Smith. The high volume of deals and some very big ones have made it the biggest quarter measured by proceeds since the third quarter of 2014, when Alibaba Group Holding Inc. /zigman2/quotes/201948298/composite BABA -2.90%  went public, raising $25 billion in what was the biggest deal ever. That deal is expected to be eclipsed by the flotation of Ant Group, the payments company that was set up to serve Alibaba in 2004 and was spun off in 2011.

Read: Ant Group IPO: Five things to know about the Alibaba affiliate aiming for the largest offering in history

IPOs have performed strongly, too, despite the pressures of the coronavirus pandemic, with an average first-day gain of 39%. The Renaissance IPO ETF /zigman2/quotes/207665280/composite IPO -3.14% gained 27% in the quarter, compared with the S&P 500’s /zigman2/quotes/210599714/realtime SPX -3.53%  roughly 6% gain.

Health care deals accounted for about half of the deal total and the sector expanded beyond small biotechs to include some bigger health services companies, including names like Outset Medical /zigman2/quotes/221035376/composite OM -1.90% GoHealth /zigman2/quotes/219228417/composite GOCO -4.56%  , Oak Street Health /zigman2/quotes/219854788/composite OSH -1.48%  and American Well Corp. /zigman2/quotes/220991557/composite AMWL -5.47%

Read: A new breed of tech IPOs may give the stock market reason to party like it’s 1999

The quarter also saw a flurry of big tech deals, led by Snowflake Inc. /zigman2/quotes/220991541/composite SNOW +2.13% , which marked the biggest ever software IPO when it raised $3.36 billion. Other standouts included Rocket Cos. /zigman2/quotes/219854810/composite RKT -7.26% , parent of mortgage lender Quicken Loans, Unity Software /zigman2/quotes/221035391/composite U -4.08%  and telehealth company GoodRx Holdings /zigman2/quotes/221104301/composite GDRX -1.83% .

Don’t miss: Snowflake IPO surge makes it the priciest tech stock by a mile

See: Quicken Loans is going public: 5 things to know about the mortgage lender

“The 10 largest IPOs raised a combined $14.7 billion, or 52% of the quarter’s proceeds, and included seven billion-dollar deals, the most ever in a quarter,” said Smith.

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3,271.03
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Oct. 28, 2020 5:11p
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US : U.S.: Nasdaq
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Market Cap
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US : U.S.: Nasdaq
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N/A
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Rev. per Employee
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US : U.S.: NYSE
$ 50.64
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P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
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Rev. per Employee
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US : U.S.: NYSE
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P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$7.06 billion
Rev. per Employee
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P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$74.93 billion
Rev. per Employee
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US : U.S.: NYSE
$ 18.65
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P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
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Rev. per Employee
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/zigman2/quotes/221035391/composite
US : U.S.: NYSE
$ 99.76
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P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
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Rev. per Employee
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Dividend Yield
N/A
Market Cap
$19.09 billion
Rev. per Employee
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