Brian Sozzi breaks down the IPO boom taking place in the market as new issue IPOs have raised a record $39.9 billion in the second quarter making it a fascinating time for the market as IPOs are seeing more embrace from investors.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live. Let's talk a little bit more about that IPO market that we have seen just come in red hot in 2021. Brian Sozzi, you're writing a little bit about this today. Just bring us through some of the numbers before-- kind of level set here before we talk about some of the issues that have come to market or are coming to market this week.

BRIAN SOZZI: Yeah, it has been a-- it's been a mind blowing few months for the IPO market here. And all this data comes compliments of the fine folks at Renaissance Capital here. 113 IPOs in the second quarter-- that is the most active quarter since 2000. New issuers raised $39.9 billion, the most ever, for the second quarter. Average IPO returns of 34%, mostly driven by first day gains. But we have seen some followthrough, and I'll mention that a little bit later.

Also the busiest quarter for tech IPOs in these two decades. We've talked a lot of tech IPOs this week and, really, throughout the IPO boom here. SPAC activity has crashed, down 83% from the first quarter in the second quarter. It's just really a complete unraveling of that SPAC trade, which was so hot in late 2020. And as it should be. I mean, a lot more scrutiny has to be placed on these SPACs. And Mr. Market has, in fact, done so.

But as I mentioned, some of these deals were outright huge. I mean, you have Didi. It remains the top trending ticker on the Yahoo Finance platform right now after its big IPO yesterday. It raised $3.8 billion. AppLovin, $2 billion. Full Truck Alliance-- interesting name there-- at $1.5 billion. Oatly, our producer Val Caval's absolute favorite brand here in the world, $1.4 billion raised. And TuSimple Holdings, $1.4 billion raised.

And you're seeing investors continuing to embrace these companies after their IPO day. You look at a company like Kanzhun. The stock's up 114% since the IPO. They are an online job recruiter in China. Agilon Health, its shares up about 70%-- they are senior care providers-- since they came out and IPOed. And again, Oatly, our producer's favorite, its stock is up 46% since its IPO. So really some strong followthrough gains here, as investors dive into these names and apparently like what they see.

And as luck would have it, we had Moelis co-founder Elizabeth Crain on the show yesterday. And we asked her why are we seeing this deal activity. Here's what she said.

ELIZABETH CRAIN: It is this momentum. And we are seeing the momentum, so many new companies emerging. I think I saw a statistic that something like 160 companies have achieved a billion dollar valuation in the last quarter alone. So I think that is, in part, driving the IPO opportunities. Companies growing rapidly and looking for capital to continue to achieve their business models.

BRIAN SOZZI: And here's my socially shareable hot take for today. I mean, Myles, this deal activity, these IPOs are unlikely to stop this type of activity. At least, this pace is unlikely to stop any time soon. You might see a strong third quarter, too, as bankers push to get deals done before any potential change in tax policy. And you have executives here that will continue to see stock prices trading where they are, the bull market continuing. And they're going to want to cash in before any potential changes in tax policies could hammer their earnings.

MYLES UDLAND: Yeah, and I think when you have that kind of disruption that the pandemic brought on the economy, you have a lot of dynamism emerges on the other side of that. There was a story today in the FT. Almost 6,300 companies were taken out in the first quarter of this year by private equity. That's a record going back at least 40 years. And, really, the PE industry as we know it didn't exist before the 1980s. So I think it's-- we're comfortable calling it an all-time record in the amount of transactions that were consummated, $500 billion worth of deals on that side.

And so there's just a huge amount of churn, Sozz, really, in the market. And, you know, yeah, we're going to talk about the FAANG names all the day, the Dow names, and all the names that get people coming to our website, the more staid members of the market. That's where we're going to bring a lot of our attention on a daily basis.

But underneath the surface, you have a lot of companies that are small, $100 million, $200 million businesses. They're going for big multiples in the private market. Or they are being taken public in some of these IPOs that maybe don't get the fanfare. I mean, Kanzhun Holdings didn't exactly light the world on fire. It didn't light our world on fire when they came public. And now the stock has been a double since then.

Obviously, when you have a name like Didi coming public yesterday, Krispy Kreme today-- everybody knows that name. Certainly when Robinhood makes its debut, Warby Parker, these are going to be big, buzzy public issues. But underneath the surface, there's just a lot of activity happening and a lot of dynamism within the market.

And something else I'd note you mentioned on the SPAC front, and just looking at a note today from the fine folks over at The Petition newsletter, they're writing about the SPAC market. And, you know, the next 18 months are going to be a fascinating time. Because you saw a rush of SPAC sponsors come to market. Now those sponsors, they raised some amount of money. And you can go buy a stake in those companies today on the public market. They have typically 24 months to find a target to bring to market, or they got to give the money back to their investors.

So either you're going to have a lot of SPACs that go through the process and come up empty, or, Sozzi, you are going to have, if you could believe it, even more questionable companies come public with even more questionable assumptions made to get the deals done. I think the market has cooled on some of that because we've seen some creative things happen already in that part of the market.

But I do wonder how many-- I would imagine hundreds of these SPAC sponsors are ultimately not going to be able to get a deal done. I just don't think there's enough companies out there right now that are going to want to do that, let alone are in a position to come public via that channel.

BRIAN SOZZI: Glad you mentioned SPACs, Myles. We had a new one that crossed the wires this morning here-- and it's near and dear to my heart-- Bowlero Corp. They're the world's largest owner and operator of bowling centers. They're going to-- they say they are combining with the Isos Acquisition Corporation in a deal valuing the company at $2.6 billion.

I mean, this is a real business. They own the PBA Tour. We have talked to PBA Tour CEO Colie Edison a lot over the past year. They've completely rebranded that business. They have overhauled their bowling facilities. That is a real business. They are producing real results. I am fascinated to see how that is ultimately embraced by the market.

The red flag here, obviously, would be what type of crowds do you have going back into bowling alleys after the pandemic. Do you get those big crowds in there, in these centers, which they need because they've spent a lot of money to upgrade the centers to potentially just basically turn them into clubs, turning them into clubs. You can drink, you can party. It's almost like a Dave and Busters here and with the bowling secondary. But very interesting SPAC transaction there that we're going to be following very, very closely.

MYLES UDLAND: I mean, look, everyone loves bowling. Bowling is a great activity. It gets more fun the older you get. I mean, but to that point, you know, that's a good business. But are you investing in a SPAC to take a good business public? A company that's growing single digit organic sales, double digit adjusted EBITDA growth. They can maybe pay a dividend, buy back some stocks, so on and so forth.

Or were you buying a SPAC to get a 100%, 200%, 300% growing company public, and be involved in that kind of growth? I mean, it's just a very different-- taking a bowling alley operator public is very different than taking a spaceflight company public. And I think that's I think some of the disconnect that's going to be emerging there in the SPAC space over the next 18 months.

BRIAN SOZZI: Myles, quick fun fact. And I wasn't going to tell you, but I fear I will. I'm not one to toot my own horn. I've bowled two 300s. I'm very proud of it. I actually carry the clippings of that--

MYLES UDLAND: Have you really?

BRIAN SOZZI: --in my wallet--

MYLES UDLAND: Is that true?

BRIAN SOZZI: --in my clo-- very true. I'll show you the write-up. I have it saved.

MYLES UDLAND: Wow. Yeah, I don't know what my PR is, but I don't think it's over 200. And I don't consider myself a particularly poor bowler. But you in 300? That's sick. We've got to go sometime.

BRIAN SOZZI: Yeah, well-- yeah, absolutely. I know you can outdrive me on the golf course, so you're good. You're good there.

MYLES UDLAND: Yeah, we'll do a post-work bowling outing as a group. All right--