Boeing's monster fundraise last week was a crucial cash injection for the company and a symbol of what has driven the equity capital markets for the last few years: follow-on and convertible offerings.
Why it matters: Stock issuance is steadily improving and expected to open up further for both public companies seeking cash and private companies seeking to list.
Zoom in: Equity-related deals have kept the equity capital markets chugging at a time when IPOs started the year with a bang then fizzled.
Zoom out: Global secondary offering activity totaled $295.3 billion during the first nine months of 2024, a 20% increase compared to a year ago and the strongest first nine months for capital raising since 2021, according to LSEG.
- And even though IPO volumes are well below historical averages, listings have been up sharply year over year since 2021.
- Total proceeds for IPOs on U.S. exchanges totaled $26 billion during the first nine months of 2024, up 45% compared to year-ago levels and a three-year high, per LSEG.
- Tech, media and telecom listings to watch in the coming year include conservative U.S. cable news channel Newsmax and ticket seller SeatGeek.
Between the lines: "A really important technical point that tends to get lost in the overall narrative is the broader distribution from small caps up to large caps," said Elizabeth Reed, global head of equity syndicate for Goldman Sachs.
- Reed noted that IPO order books are seeing strong participation from mutual funds, pensions, hedge funds and retail across the board.
- "Additionally, IPOs are generally trading well in the aftermarket which is an indicator that the market is healing and functioning," she says.
Yes, but: Even with Wednesday's post-election bump, the equity capital markets system has a long way to go before it recovers and hits levels attained in 2021 and pre-COVID years. For now, follow-ons will lead the pack ahead of IPOs.
Reality check: One issue holding back listings is private equity firms holding onto portfolio companies that won't fetch 2021 valuations. But some sponsors are starting to let go.
- Platinum Equity just IPO'd Ingram Micro, a tech company that raised $409 million.
- "We're not all clear, but obviously we're encouraged," said Reed.
- "The big question is when does the growth of IPOs return to where it was, with the kind of depth and cadence we've seen in previous years, and I think the answer to that is highly correlated to the rate environment."
