Wall Street has seen some key records this year. While investors cheered the surge in benchmarks with S&P 500 (SPX) hitting 53 record highs so far, 2014 also became a record year for initial public offerings (IPOs). The U.S. IPO market was the biggest in 2014 since 2000 in terms of both value and number. The size was mostly boosted by the Chinese e-commerce behemoth Alibaba (BABA). The financial firms too raised significant funds – highest since 2008 – via IPOs in 2014. Meanwhile, Nasdaq was the most preferred option among U.S. exchanges for launching the IPOs.

However, the massive volume and proceeds did not translate into being the most profitable year. The average offering return was at 16% in 2014, significantly lower than 41% in 2013. However, the gain was better than the S&P’s 12.6% return year to date. Separately, we have varying figures from Ernst & Young, which took 288 IPOs into account and stated that averaged return was 17.1% year to date.

275 Companies Launched IPO

According to IPO exchange-traded fund manager Renaissance Capital, so far 275 companies became publicly-traded on the U.S. exchanges and raised over $85 billion. Another report from Ernst & Young LLP notes that 288 IPOs this year raised $95.2 billion, up 54% from 2013. In fact, a report titled EY Global IPO Trends: 2014 Q4 also suggested that IPO activity globally was the best one since 2010.

IPO activity is said to be “uninterrupted” as the major global geopolitical and economic concerns failed to affect. Renaissance Capital stated: “While various global events, such as Russia's incursion into the Ukraine and conflicts in the Middle East, caused nervousness in global markets, they largely failed to disrupt the US IPO applecart.”

Global IPOs & Financial Sponsors

Globally, 1,206 IPOs raised $256.5billion in 2014, according to Ernst & Young. This marked a 35% increase in volume and 50% jump in value from 2013. Sectors trending on the global IPOs front were Healthcare with 193 deals raising $21.8 billion, followed by Technology with 167 deals collecting $50.2 billion, and industrials accounting for 142 deals that attracted $19.9 billion.

Much of the global IPO market was dominated by financial sponsors. Ernst & Young analyst Maria Pinelli and others noted that financials dominated “as they took advantage of positive market sentiment, primarily in the U.S., mainland Europe, and UK, to dispose of assets acquired in the peak of the economic cycle in 2006-07.” Proceeds from 328 financial-sponsored IPOs jumped 86% from last year to $124 billion. This was about half of global IPOs by value.

Separately, cross-border deals were also impactful this year. A total of 129 IPOs on that front represented 10.7% of all deals, the best since 2007. Among these, 52% of the cross-border listings were done on U.S. exchanges, which in turn accounted for 23.3% of the U.S. deal volume.

Records Galore

Among the U.S. exchanges, Nasdaq (NDAQ - Analyst Report) emerged as the most proffered destination for launching IPOs. Nasdaq saw 189 IPOs this year, up from 126 IPOs in 2013. The combined proceeds from IPOs listed in Nasdaq was above $22 billion. Total proceeds raised improved 39% from 2013.

Financials were also in the limelight on the domestic front. Financial companies this year raised most money in the U.S. since 2008. Citizens Financial Group Inc. (CFG - Snapshot Report) and LendingClub Corp.(LC) raised a combined $16.8 billion. Four of the five biggest IPOs in the country comprise financial firms, contributing 19% of the total capital collected through all sales. Citizens Financial, Synchrony Financial (SYF - Snapshot Report), Ally Financial Inc (ALLY - Snapshot Report) and Santander Consumer USA Holdings Inc. (SC - Snapshot Report) were among the largest IPOs.

Obviously, Alibaba was the biggest IPO, not only for 2014 but the biggest in history. Alibaba’s stock began trading at $92.70, well above its IPO price of $68, backed by strong demand. The nearly $22 billion collected via the IPO outperformed $17.8 billion raised by credit card marketer Visa's (V - Analyst Report) IPO in 2008 and Facebook's (FB - Analyst Report) $16 billion in 2012. (Read:Alibaba IPO Amasses $21.8B on NYSE Day 1 Trade; Up 38%).

In November, Antero Midstream Partners LP (AM - Snapshot Report) became the largest master limited partnership IPO in history after collecting $1.15 billion. Following this, Paramount Group, Inc. (PGRE) became the biggest IPO of a real-estate investment trust. It raised $2.29 billion. Juno Therapeutics was the final addition this year on the IPO list, which became the highest market capitalization biotech firm on its debut.

Billion-Dollar Club

Joining Alibaba in the billion-dollar club were Citizens Financial, Synchrony Financial, Ally Financial, JD.com, Inc. (JD), Santander Consumer USA, which raised $3 billion, $2.9 billion, $2.4 billion, $1.8 billion and $1.8 billion, respectively.

Interestingly, some of these were spun off from certain bellwether companies. Synchrony Financial was spun off from General Electric (GE).  Citizens Financial, the biggest bank IPO since the financial crisis, was spun off from The Royal Bank of Scotland Group plc (RBS - Snapshot Report). (Read: Would RBS' Citizens Financial IPO Lure Investors?)

However, returns were not necessarily high for the billion-dollar IPOs. Synchrony Financial, JD.com and Citizens Financial have gained 30.4%, 11.2% and 9.1%, respectively, since they began trading. However, Ally Financial and Santander Consumer USA are down 1% and 21.4%. Meanwhile, Alibaba has returned 12.6%.

Returns

Talking of returns, and as mentioned earlier, a busy year did not turn out to be the most profitable one. This was also the first year (apart from 2011 when return was negative) that average debut return did not hit 20%. The average debut return was 13%. Also, 28% of deals had fallen on debut.

The debut concerns were more evident given the fact that 40% of the IPOs were priced lower than their estimated range. Last year, 29% deals were priced lower than the expected range.

Worst Performing IPOs

Biotech firms dominated the top-performing list. The average biotech IPO return stands at 32%, double of what the average return for 2014 is. However, biotechs also featured among the worst returns. For example, Recro Pharma, Inc. (REPH), which carries a Zacks Rank #4 (Sell), has lost 65.2%. Separately, Amedica Corporation is down 87.1%. The average return from the energy sector was a loss of 13%, the worst performing sector apart from utilities, which had just one IPO.

Here we will list the top 10 worst IPOs for 2014 based on their returns from offer price:

Source:YahooFinance

Among these worst performers, North Atlantic Drilling Ltd (NADL) and Biocept Inc (BIOC) currently hold a Zacks Rank #4. Eclipse Resources Corp (ECR) and A10 Networks Inc (ATEN - Snapshot Report) carry a Zacks Rank #3 (Hold).

IPOs in 2015

After a busy 2014, outlook for 2015 remains bright. The possible headwinds next year include the gloomy energy sector and international economic growth. The Fed is most likely to raise rates in 2015. Renaissance’s private company “watchlist” estimates 255 companies debuting on the Street in 2015. Among these, 80% are said to be from the tech sector and includes popular names like GoDaddy and Spotify.

However, 2015 should not only be about volume, proceeds and how busy it is, but should post higher returns.