Offerings Break Record Despite Pandemic

The pandemic may have closed stores and movie theatres but not the IPO market.

Companies worldwide raised a record $750 billion in the equity capital markets during the first three quarters of 2020, using the proceeds to build cash cushions in these uncertain times, or to fund acquisitions and increase market share ahead of the expected recovery

Data from Refinitiv show that the surge in capital-raising activity was driven by secondary offerings of common stock, aided by a rise in global initial public offerings to a two-year high. The momentum has carried into this year’s final quarter, with China’s Ant Group raising $34 billion in October, beating Saudi Aramco’s $29 billion sale last year to become the largest IPO ever.

The 4,200 equity capital market offerings globally in the first three quarters of 2020 was also a record. The nine-month total proceeds of $477 billion from stock offerings was up 78% from the same period last year. Global convertible note offerings, which can be exchanged for shares, rose 41% to a record $137 billion.

In Asia, IPOs of companies based in China more than doubled to a record $60 billion in the first nine months of this year, which does not include Ant’s listing in Shanghai and Hong Kong. The new Nasdaq-like STAR Market in Shanghai attracted a rush of technology issues. The Philippines had its largest IPO in seven years in October. Converge ICT Solutions, which plans to connect 60% of Filipino households to broadband in the next five years, raised $600 million, but its shares slipped in their debut after being priced at a premium to regional peers.

The US new-issuance market had its busiest third quarter by deal count since the Dot-com era, with 81 IPOs raising $28.5 billion versus $10.8 billion in the same period a year earlier, according to Renaissance Capital. The healthcare sector accounted for about one-half of this year’s IPO activity in terms of number of deals. “A wave of high-profile tech unicorns resulted in the [technology] sector netting the most quarterly proceeds,” says Bill Smith, CEO of Renaissance.

Morgan Stanley was the top managing underwriter of equity and equity-related issues globally in the first three quarters of 2020, with more than $76 billion of proceeds, followed by Goldman Sachs, with $73 billion, and J.P. Morgan, $67 billion, according to Refinitiv.

“IPO alternatives continued to generate buzz, with a record-breaking 82 SPACs raising $30 billion and direct listings from Asana and Palantir,” Smith says. “The steady flow of deals has kept the pipeline moving.” The surge in equity issuance came as stock markets rose sharply in many countries and central banks pumped out massive amounts of liquidity to stimulate economic growth.