The number of IPOs worldwide has risen sharply, with considerable activity in the US and Asia in the first three months of this year, coming off the back of a busy 2020. Much of this came from SPACs - "blank cheque" entities raising cash for takeovers.
The total value of initial public offerings – important liquidity events that wealth managers track – stood at $201.1 billion in the first three months of this year, surging by 524 per cent on a year earlier, figures show.
A report by BuyShares.co.nz said that finance companies raised almost $100 billion alone in the quarter, about half the total since the start of 2021. Although the report did not mention the fact, much IPO activity in the US has revolved around Special Purpose Acquisition Companies (SPACs). SPACs, which are used to raise money for acquisitions, have boomed amid ultra-low interest rates and a buoyant equity market. Some commentators fret that the surge could get out of hand.
IPOs, along with trade deals and the exercise of share options, are one of the means by which new high net worth individuals are minted. They are not always straightforward. Last year, for example, in early November Chinese regulators suddenly halted an Ant Group dual-listing IPO that was valued at $34.4 billion. (Regulators were reportedly concerned about the impact of Ant’s services on the financial markets.) In the UK, food-delivery firm Deliveroo – a prominent “gig economy” firm – had a poor IPO debut, with shares sliding by about a third after the float. (The firm’s IPO was reportedly hit by factors such as investor dislike of “gig economy” employment practices, valuations, and how the imminent re-opening of UK restaurants could weaken demand for deliveries to the home that had flourished during the pandemic.)
Last year, US companies raised $144.4 billion through more than 400 IPOs, a 157 per cent increase year-over-year (sources: Wall Street Journal, Dealogic). So far in 2021, IPO activity in the US market surged to $117.6 billion worth of deals between January and March, a rise of 1,169 per cent year-over-year. European firms raised $28.6 billion through IPO deals, 28 per cent more than in 2019. The IPO activity surged in the first quarter of this year, with the value of closed deals soaring by 2,392 per cent year-over-year to $31.1 billion.
Asia witnessed $41.4 billion worth of IPO deals between January and March, 135 per cent more than the same period a year ago. Latin America followed with a $4.4 billion value, a 406 per cent rise.
Citigroup topped the global list of investment banks with $21.1 billion worth of IPO deals in the first three months of 2021. Goldman Sachs ranked second with $18.6 billion. Morgan Stanley, Credit Suisse, and JPMorgan followed with $13 billion, $11.3 billion, and $11.1 billion worth of deals, respectively.