(Reuters) – Emergency corporate fundraising and a clamor for listings on the tech stock market have raised capital market volumes to more than $ 1 trillion in 2020 and investment bankers’ industry fees to a record high , showed data.
As the COVID-19 pandemic spread around the world, companies turned to their shareholders en masse to get the financing they needed to overcome a hard-hitting global recession.
Combined with the demand for new growth-oriented companies – especially technology – in an era of record low interest rates, this accounted for a record year in fundraising for the stock market, bankers and analysts said.
Global stock capital markets (ECM) activity soared 55% to a record $ 1.1 trillion in 2020, data from Refinitiv showed. (Graph: 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 characterized by companies ranging from airlines to retail and hospitality struggling for funds to resist the pandemic or to pay emergency government loans.
Air carriers such as Lufthansa and IAG, the owner of British Airways, led the way, exploring the billion dollar markets to face a severe crisis in the sector.
But as the year progressed and the central bank’s unprecedented action overwhelmed the markets, a series of initial public offerings hit the market, pushing IPO volumes in the United States to a $ 80.23 billion high in 13 years. , showed data from Refinitiv.
These were characterized by unprecedented pops on the first day, with names like Airbnb and Snowflake backed by Warren Buffet 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 rank high. Sectors like health, fintech and technology are a big part of that, ”said James Fleming, global co-director of equity markets for Citi.
Fleming expects the trend of technology IPOs to continue in the first half of 2021, while capital increases for balance sheet purposes are also expected to continue into the new year, with many sectors still not fully recovering from the COVID-19 crisis.
Although the United States is at the forefront of the IPO boom, the trend is likely to spread to Europe in 2021.
For global ECM rate graph:
Overall, bankers earned $ 28.7 billion with ECM fees, the highest annual premium of all time. IPO rates have also reached a $ 10 billion high in 13 years, the data show.
These numbers rise to $ 32.5 billion and $ 13.8 billion, respectively, by including the listing of so-called special-purpose acquisition companies (SPACs), although fees on such deals are only due in full if the vehicle runs out acquiring a company.
The 2021 issue could be supported by a continued increase in merger and acquisition activities.
“In Europe, we will see much more capital financing related to mergers and acquisitions in 2021 in a wide range of sectors, as opposed to just balance sheet repair situations,” said James Palmer, head of 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 problem. This increased the threat of regulatory hurdles for technology companies, especially those with operations in China.
However, with more positive news about vaccine launches emerging around the world, investors also expect the flow of IPOs to continue unabated.
Companies that were satisfied with private financing rounds in the past are now coming to the public market to take advantage of fluctuating stock market valuations.
“There is a pendulum change that is underway,” said 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 hit the market.”