Flush with stimulus cash, investors push global IPOs to record levels

The rising confidence in the future of electric vehicles (EVs) and other green initiatives, the ascent of blank-cheque companies, and corporate entities across the world looking to leverage high valuations have resulted in a bumper year for maiden offers. At the global level, initial public offerings (IPOs) have sped past the previous year, data indicate.

What is surprising is the IPO boom happening despite COVID-led disruptions impacting the global economy. At various times, several regions were under complete lockdown; industries such as hospitality, travel and tourism, and aviation took a giant knock from the pandemic. And yet, the stock markets mostly performed well, which perhaps explains the success of IPOs this year.

Staggering numbers

As the year comes almost to an end, around 2,850 corporate entities have raised over $600 billion via IPOs, said a Bloomberg report. This represents a record both in terms of number of public offers and amount raised, and surpasses the previous high seen in 2007, the data revealed.

Also read: India’s IPO listings of 2021 — The top 5 and the bottom 5

A substantial portion of the rise could be attributed to regulatory and policy measures as well as market dynamics, said experts. Sustained bullish phases across several markets encouraged companies to launch IPOs.

The stimulus packages rolled out by governments — both advanced and emerging — increased the cash in hand, and induced investors to put in their money in IPOs. The stimulus initiatives also boosted market sentiments and helped companies grow their earnings, said the report.

The rapid growth of the green energy market was perhaps behind the spectacular maiden issue of Rivian Automotive Inc, a US-based EV start-up. The company raised around $12 billion earlier this month, making it the year’s biggest IPO. In Asia, the biggest was the IPO of China Telecom Corp, which raised around $8.4 billion in August, said Bloomberg.

In Europe, the top IPO firm was parcel-locker services provider InPost SA, at $3.2 billion in an Amsterdam listing.

Attention on SPAC

Special purpose acquisition companies (SPACs), popularly referred to as blank-cheque companies, have been the flavour of the year, their IPOs reaching a record high of $159 billion. So big was the trend that it led to Nasdaq — a SPAC favourite — trumping London as 2021’s most sought-after IPO destination.

Under the ‘system’, a SPAC raises funds in an IPO and deploys that to acquire a private company anywhere in the world. This gives the other company quick access to top capitals markets, such as the US, avoiding an IPO of its own. It’s legal and above board, but regulators across the world have begun to crack down on it fearing misuse. In the US, for instance, the associated accounting practices and oversight norms are getting tighter.

Next year, as experts predict a market correction, a parallel impact on IPOs — both numbers and proceeds — is likely. Some cooling down is already witnessed, with companies moving their public issues to 2022, say reports.