(Reuters) – Necessary fundraising and a call for tech stock market listings pushed equity market volumes to more than $ 1 trillion in 2020 and fees for investment bankers in the industry to record levels, data showed.
As the COVID-19 pandemic raged around the world, companies were turning to their shareholders en masse to get the funding needed to weather a severe global recession.
Combined with the demand for new growth-oriented companies – especially tech – in an era of record low interest rates, that was responsible for a record year in fundraising in the stock market, bankers and analysts said.
Global equity capital markets (ECM) activity soared by 55% to a record $ 1.1 trillion in 2020, Refinitiv data showed. (Image: Global ECM Volumes Reached $ 1 Trillion for the First Time)
For an interactive version of this chart, click here: tmsnrt.rs/2KMWs5I
The year was marked by companies ranging from airlines to retail and hospitality looking for money to weather the pandemic or to pay off emergency government loans.
Airlines such as Lufthansa and British Airways owner IAG have led the way by tapping into markets for billions of dollars to deal with a serious crisis in the industry.
But as the year progressed and as unprecedented central bank moves boosted markets, a slew of IPOs hit the market, pushing US IPO volumes to a 13-year high of $ 80.23 billion. the data from Refinitiv showed.
These featured unprecedented first-day pops, with Airbnb and Warren Buffet-backed Snowflake doubling in value on their market debut.
“In a world of incredibly low interest rates, any company that can demonstrate growth in future cash flows will be rated highly. Sectors such as healthcare, fintech and tech are a big part of this, ”said James Fleming, Citi’s global co-head of equity capital markets.
Fleming expects the trend of IPOs in technology to continue in the first half of 2021, while increasing equity for balance sheet purposes is also likely to continue into the new year, with many industries not yet fully recovering from the COVID-19 -crisis.
While the United States has been at the forefront of the IPO boom, the trend is likely to spread to Europe in 2021.
For graphical representation of global ECM fees:
In total, bankers made $ 28.7 billion in ECM fees, the largest annual pot ever. IPO fees also hit a 13-year high of $ 10 billion, the data shows.
Those figures add up to $ 32.5 billion and $ 13.8 billion respectively when the listing of so-called special purpose acquisition companies (SPACs) is included, although fees for such deals only have to be paid in full if the vehicle eventually takes over a business.
The 2021 issuance could be supported by a continued increase in mergers and acquisitions activity.
“In Europe, in 2021 we will see much more M&A-related equity financing across a wide range of sectors, as opposed to just balance sheet repair situations,” said James Palmer, EMEA ECM at Bank of America.
The cancellation of Ant Group’s planned $ 37 billion listing – in what would have been the largest IPO in history – was the only fly in the ointment. It raised the threat of regulatory hurdles for technology companies, especially those with operations in China.
But with more positive news from the introduction of vaccines around the world, investors also expect the flow of IPOs to continue unabated.
Companies that have historically been satisfied with private funding rounds are now coming to the public market to take advantage of strong stock market valuations.
“There is a pendulum swing,” says Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management. “As long as valuations remain high, there is an incentive for private equity to go to the market.”