This Thursday, Ally Financial will start trading on the New York Stock Exchange with a $2.5 billion initial public offering. It will be the largest public offering so far this year, but the shadow of the second largest could darken the prospects for this offering.
Last quarter’s $1.8 billion Santander Consumer IPO was the largest private equity-backed deal to come to market, according to research and money management firm Renaissance Capital.
Renaissance principal Kathleen Smith told Auto Finance News in an email that the firm’s analysis shows that Santander Consumer priced its IPO at the high end of the range and traded up 5% on its first day of trading. But more recently, the stock has since fallen below its IPO price. Santander’s IPO debuted at $24 and $25 per share, but has since fluctuated as high as $26.50 and as low as $22. Its price at press time was $22.63.
The weaker-than-expected trading on Santander stock, expectations that Treasury will divest the remainder of its Ally stake shortly after the offering, and weak stock market conditions could dampen enthusiasm for the Ally IPO, according to Renaissance.
Already in 2014, there have been 71 IPOs raising a total of $12.6 billion. The financial sector has represented 7% of issuance and 19% of dollars raised over that period.
IPOs have outperformed the S&P 500 until recently. In 2013, the Renaissance IPO exchange traded fund, a cap-weighted basket of newly public companies, tracked an index that was up 54.3% compared to 29.6% for the S&P 500. Renaissance’s IPO ETF is now down 1.1% through April 4, compared to a positive 0.9% return for the S&P 500.