How To Tap The Booming IPO Market With ETFs

IPO Saw Huge Success

Vroom.com debuted on Jun 9 and soared 11.8% on the first day of trading. The online used-car car seller lost $143 million in 2019 and $41 million in its first quarter of 2020, both of which are loss expansions from the previous year. The company priced its IPO at $22 per share.

Warner Music Group was the big IPO that hit the market on Jun 3. The IPO was priced at $25 per share. The world's third-largest recording label gained about 20% on their first day of trading. Meanwhile, ZoomInfo Technologies skyrocketed about 60% on its first day of trading. An intelligent go-to-market platform priced its IPO at $21 per share on Jun 3, above its target range of between $19 and $20. It reported 40% revenue growth in the first quarter.

Shares of Legend Biotech and Shift4 Payments Inc jumped as much as 73.6% and 51%, respectively, on their debut on Jun 5. The successful debuts indicate investors’ strong appetite for new stock offerings post COVID-19 lockdowns.

How to Tap?

Investing in multiple IPOs at the same time can be a difficult task. So, investors can easily tap the IPO resurgence with the two domestic-focused ETFs discussed below. These funds have been seeing solid upside in recent weeks given the number of planned offerings. 

Renaissance IPO ETF (IPO - Free Report)

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 50 stocks in its basket, with each accounting for less than 10.7% exposure. Technology is the top sector accounting for 47.7% share while healthcare and communication services round off the next two spots with double-digit allocations each. The fund has amassed $46.8 million in its asset base while it trades in a light volume of about 23,000 shares, probably implying additional cost beyond the expense ratio of 0.60%. The product has surged 11.8% in a month.

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