Monday, January 30, 2023

Market shock in 2020 gives way to IPO boom

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Companies raised more money on stock quotes in 2020 than in any year other than 2007, as a rebound in stock valuations attracted companies and vehicles for acquiring blank checks emerged. rushed to the list in the United States.

The companies raised nearly $ 300 billion through IPOs around the world in 2020, including a record $ 159 billion in the United States, according to data provider Refinitiv. The boom included the public debuts of high-flying tech companies such as By Dash and Airbnb, as well as lists of groups looking to buy more and speed them up in public markets.

The lists provided companies with financial power in a year when the coronavirus pandemic hit hard but left very different marks on financial markets from Hong Kong to London to New York.

After a violent setback in March, US stocks returned to record highs as investors grabbed shares of technology groups that grew as consumers and businesses moved to work from home. This provided fertile ground for the beginnings, including Snowflake, the cloud computing provider, and Unity software, which makes technology for video game developers.

“Companies that have benefited from the changes that have occurred have seen incredible responsiveness from a wide range of investors,” said David Ludwig, head of equity capital markets in the Americas at Goldman Sachs. Mr Ludwig noted that demand was particularly strong for flotations from tech, healthcare and consumer groups.

Jeffrey Bunzel, head of equity capital markets at Deutsche Bank, added that investors had come to believe that the coronavirus would have long-term effects, especially on tech companies.

“There is a reality on how they became important to the world,” he said. Some people “just won’t feel comfortable going back to the restaurant and will continue to order food instead,” he added.

By removing the roughly $ 76 billion raised through blank check companies, transaction activity in the United States and Asia jumped more than 70% from the previous year. Registrations in Europe, on the other hand, were sluggish. At $ 20.3 billion, they fell by a tenth from 2019 to almost half of 2018 levels.

Proceeds in Asia, at $ 73.4 billion, would have been much higher if the payment company Group of ants did not halt its successful $ 37 billion IPO after clashing with Chinese regulators.

Ant’s absence earned the Beijing-Shanghai bullet train the crown of the year: the $ 4.4 billion it raised when it went public was the biggest of the year, exceeding the 3.9 billion dollars raised during the listing of Snowflake and the 3.8 billion dollars collected by Airbnb.

Registrations for Special Purpose Acquisition Companies, or Spac, have multiplied. By the end of the year, blank check companies accounted for just under $ 76 billion of the cash raised in the United States. And more are expected to follow in the New Year. End December, SoftBank filed documents to list its own Spac on the Nasdaq.

Line graph of number of US listed IPOs by month showing Since August, Spac listings have outnumbered traditional US IPOs

Bankers and investors are now look if the Spac phenomenon will migrate beyond the borders of the United States, according to James Palmer, head of equity capital markets for Europe at Bank of America.

Some investors have expressed their unease signs of foam in the markets, with one-day price jumps in recent IPOs, including for Airbnb, prompting comparisons to 2000 and 2007.

But John Leonard, global head of equities at Macquarie Asset Management, said that while valuations had been high, they were now linked to strong sources of income. “People don’t try to value things by clicks or by eyeballs,” he added.


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