Businesses Raised $159B In 2020 US IPO Boom: Refinitiv

2020 was the second-best year for the market listings after 2007, the Financial Times reports. After the COVID-19 pandemic hit U.S markets in March, equity valuations rebounded, making way for initial public offerings (IPO) and blank-check acquisition vehicles.

What Happened: As per Refinitiv, businesses raised $300 billion globally, including $159 billion in the U.S. from the public listings this year, FT noted.

U.S. equities hit record highs in 2020, primarily led by technology stocks. With people locked in their houses, technology helped businesses move to work from home and consumers to shop online.

The tech-spurred rally provided the ground for tech listings like Snowflake Inc SNOW and Unity Software Inc U. Of late, Airbnb Inc ABNB and DoorDash Inc DASH had stunning IPOs, with shares more than doubling on listing. 

David Ludwig, head of equity capital markets in the Americas at Goldman Sachs, told FT that a shift in consumer behavior attracted investors to IPOs. He added that demand was strong for flotations of technology, healthcare, and consumer groups.

Special purpose acquisition company deals also boosted this year as it became a popular vehicle to fast track public listings of private companies by ditching the traditional IPO process.

Excluding the SPAC listings, deal activity in the U.S. and Asia jumped more than 70% from 2019, as per FT. Asia saw a $73.4 billion capital raise, which could have been higher had the Chinese regulators not halted Alibaba Group Holding Ltd BABA-backed Ant Group's IPO.

Why It Matters: SPAC deals raised $76 billion in the U.S., and bankers are watching if the SPAC phenomenon will migrate beyond U.S. borders, FT noted. Japan-based SoftBank Group Corp. SFTBY filed for its first SPAC IPO last week.

However, many investors believe that the IPO boom has led to market froth. Famed tech investor Paul Meeks gave bearish views on Airbnb and DoorDash.

Silicon Valley investor Bill Gurley believes that change in direct listings approved by the United States Securities and Exchange Commission will lead to the demise of traditional IPOs.

Goldman Sachs Group Inc GS Chairman and CEO David Solomon warned against market euphoria and IPO frenzy, adding that excessive retail participation and cheap money has led to IPO boom.

Photo courtesy: bfishadow on Flickr