Market shock in 2020 gives way to IPO boom

Companies raised more money through stock market listings in 2020 than in any year besides 2007, as a rebound in equities valuations lured in businesses and blank-check acquisition vehicles rushed to list in the U.S.

Businesses raised almost $300 billion through initial public offerings globally in 2020, including a record $159 billion in the U.S., according to data provider Refinitiv. The boom included the public debuts of highflying tech businesses such as DoorDash and Airbnb, as well as listings for companies that seek to buy others and fast-track them on to public markets.

The listings have provided financial firepower for companies in a year when the COVID-19 pandemic hit hard but left vastly differing marks on financial markets from Hong Kong to London to New York.

After a violent pullback in March, U.S. equities have rallied back to record heights, with investors snapping up shares of technology companies that have grown as consumers and businesses moved to work from home. That provided fertile ground for debuts including Snowflake, the cloud computing provider, and Unity Software, which makes technology for video game developers.

“Companies benefiting from the shifts that occurred saw incredible receptivity from a broad set of investors,” said David Ludwig, global head of equity capital markets at Goldman Sachs. Ludwig said demand was particularly strong for the IPOs of technology, healthcare and consumer companies.

Jeffrey Bunzel, head of equity capital markets at Deutsche Bank, said investors had come to believe that the coronavirus would have long-lasting effects, particularly on technology companies.

“There is a reality of how they have become important to the world,” he said. Some people will just “not feel comfortable going back to eating out and will continue to order food instead.”

Stripping out the roughly $76 billion raised through blank-check companies, deal activity in the U.S. and Asia jumped more than 70% from the previous year. Listings in Europe, by contrast, were lethargic. At $20.3 billion, they were down by 10% from 2019 and almost half of 2018 levels.

Proceeds in Asia, at $73.4 billion, would have been far higher if payment company Ant Group had not halted its blockbuster $37-billion IPO after it ran afoul of Chinese regulators.

Ant’s absence handed Beijing-Shanghai High Speed Railway the year’s crown: The $4.4 billion it raised in its IPO was the largest of the year, topping the $3.9 billion raised in Snowflake’s listing and $3.8 billion collected by Airbnb.

Listings for special purpose acquisition companies, or SPACs, have proliferated. Close to the end of the year, the blank-check businesses had accounted for slightly less than $76 billion of the cash raised in the U.S. And others are expected to follow in 2021. In late December, SoftBank filed paperwork to list its own SPAC on the Nasdaq.

Bankers and investors are now watching if the Spac phenomenon will migrate beyond the U.S., said James Palmer, head of equity capital markets for Europe at Bank of America.

Some investors have expressed unease over signs of froth in markets, with one-day share price pops in recent IPOs, including for Airbnb, prompting comparisons to 2000 and 2007.

But John Leonard, global head of equities at Macquarie Asset Management, said that although valuations had been elevated, they were now tied to strong revenue streams. “People aren’t trying to value things per click or per eyeball,” he said.

© The Financial Times Ltd. 2020. All rights reserved. FT and Financial Times are trademarks of the Financial Times Ltd. Not to be redistributed, copied or modified in any way.