Interview
The Momentum Driving Equity Issuance
- Capital raising in May and June reached $75 to $80 billion, exceeding double the volume of any month since 2018, driven by initial pandemic-impacted issuances for operations and subsequent growth-focused capital from less affected companies.
- Approximately 80% of IPOs are currently trading above their offer price, significantly higher than the historical 50%, with early post-crisis IPOs structured conservatively to generate aggressive aftermarket returns and stimulate interest in alternative listing structures.
- Direct listings are favored by capital-neutral companies seeking market-based pricing, though increased adoption is anticipated if the SEC permits primary capital raising within this framework.
- SPACs are gaining traction due to price and proceeds certainty, sponsor partnerships, and incremental diligence; Goldman Sachs has completed 25 SPACs since entering the market in 2016, with 2020 year-to-date volume reaching $20 billion.
- SPAC popularity growth is attributed to improved sponsor quality, better merger economics, and successful back-end transactions, with $20 billion raised in 2020 and structural evolution expected to sustain these trends.
- Listing activity across IPOs, direct listings, and SPACs is expected to continue accelerating, while the vast majority of recapitalization transactions are viewed as likely completed.
- M&A activity, currently showing early signs of recovery after a recent slowdown, is projected to increase later in 2020, 2021, and beyond, necessitating debt and equity capital market financing.
- Equity re-issuance to reduce debt levels is occurring now, with further activity expected in hardest-hit sectors as business conditions normalize, valuation visibility improves, and deal financing needs arise.