The number of initial public offerings (IPOs) involving corporate venturers as exiting investors, which GCV Analytics has been tracking, went up over the past few years: it increased to 80 by the end of 2018, up from 45 such transactions the previous year, and by the end of October this year, there were 60 recorded IPOs with corporates exiting throughout 2019. The overall trend still appears upward but it is unclear if it will be sustained by the end 2019, as this year has seen somewhat disappointing high-profile IPOs in the ride hailing space like Uber’s and even stalled IPOs like WeWork´s.
This is also true for the total dollar amounts involved in these flotations. We observed a four-fold increase from $4.32bn in 2016 to $25.85bn in such IPOs in 2018. The total estimated dollar value of such exits stood at $22.03bn by the end of October this year.
While there are recorded exits of corporates in IPOs of companies from virtually all sectors, one sector in particular – life sciences – sticks out when analysing the number of exits by sector. As drug and medical devices development are characterised by long and expensive R&D processes, in a low interest rate environment (such as we have been living in since the Great Recession), it is more financially viable for incumbent pharmaceuticals to externalise innovation and engage in a variety of investment to harness external innovation and eventually make it commercially viable. It is, therefore, unsurprising that IPOs have become one of those ways to spread and share risks.
As illustrated on the third chart here, IPOs of corporate-backed business from the life sciences sector are not necessarily even among the most sizeable ones. While there seems to be no particular pattern associated with median size of such IPOs, in recent years companies from the IT and transport and services sectors to have been raising larger IPOs than businesses from other sectors. On the other hand, the IPOs of emerging enterprises from the consumer and media sector have registered declines in median size.
