« Exchanges at Goldman Sachs

What’s Behind the Record-Breaking IPO Market?


Global equity issuance is up substantially and on track to set new records in 2021. Goldman Sachs’ Elizabeth Reed explains why—and how—more companies are choosing to go public today. 

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This exchange is almost sacks I'm Alpha Nathan senior strategist Goldman Sachs Research. Today, you were going to lie at the surgeon equity issuance and what promises to be a record breaking market for ideas. This fall to do that I'm joined by Lizzie we'd Global headed the equity capital markets, syndicate desk in our investment banking division. Was you welcome the programme? Thank you for having Allison go to start off with the set the stage for us give us a sense of overall equity issuance this year and where we are, as we hadn't thought, wonderful want them It is certainly a ban and we are really excited about what will be a very active September, but also very active to four of two thousand twenty wine. I guess I'm contacts around issuance volumes on a global perspective street. Why
issuance near today is just north of a trillion dollars to put that in perspective. That's up thirty nine percent. versus where we were this time last year in two thousand and twenty, and in fact, the very close to record breaking global issuance volume record, which was one point, one six trillion that occurred for oh year of two thousand and twenty so clearly we're tracking, very well in terms of absolute issuing. Bubbles for two thousand twenty one? So what does it look like by region? Every region is obviously up on a year and it has substantially savvy look at America has, for example, America's she went stands just shy of four hundred and fifty million dollars. That's about thirty five percent you're a year. If you look at emu emu issue and stands just north of two hundred billion dollars here today. That's up about fifty six, percent, you are real and if you like,
and the asian region, Asia issuances at three hundred and sixty five billion, which is also up about thirty five percent every year, and so it's really encouraging to see issuance volume continue to increase knowledge. region, but also by product I described Treat white issuance by him. That's impose above IP owes. Marquis follow one convertible offerings and register blocks so now that we're all back at work or even the September counter, how is the fall shaping up? We're really encourage? from the backlog that were seeing for September across all products and regions and elections take America's as a very quick example Frio September. If two thousand and twenty, and the american region was the most active September in history do you one billion dollars, this We can in America, is twenty
two billion dollars of St White issuance printed sorority near half of what the full month was into thousand and twenty, and that should be an indicator just deep public ip calendar. The desire for many companies to do marketed follow marketed, follow there. Butter, no format of primary raise or a p farmer vc looking to do maybe a potential secondary it or the fact that Aids or allow and might be opportunistic furnish worthy, do a convertible bonds that we feel very incur about what, seeing the market right now. What'll in September, on volume, but the outlook and activity levels for tee for well, those are some really big numbers. So as we look at the situation. pipeline. Why or companies so interested in pursuing an ip? Oh now, were very much in a Goldilocks scenario, where you have a say, people macro backdrop, not explain the fact of arson Symptomatic
contained a track in terms of investor sentiment and direction of equities globally, but it essentially format You wish perspectives the year today perform as in the indices, have really seen tremendous multiple expansion within the markets. So, if you're in issuing client you, Sir like the he can't XIV today, never cheer about highly? I the amount of strong capital formation that were seeing on the basic community, and I see the bicycle community is very diversified in terms of private investor, whether its needs we'll find yes, she dedicated finds pension, fines on a global basis, war, the strategic funds can play across the capital, structure and kind of the private or public. Investing in privacy as Walter Hedge Fund unity, and been really encouraging to see the amount of capital formation on the by side, which is really a neighbour issuers to partner with different types of investor, as you know, in a new term, but also in the long term and the last minute
we highlight in terms of the strong I feel pipelines is be seen as a tremendous amount of innovation within the equity capital markets. Oda by that, is that the method and worship sure, can go public based upon what their objectives might be. So it can be a traditional ip yo. It could be a direct listing. You can go like the spanish and still it's really wonderful, see those three kind of pillars in the market right now, plus a very stable macro backdrop, a really allowing issuers and investors to focus on the ass, a class whether they are going public or look into the cap all in a very efficient manner. So, let's go but more about the various routes to going public that you just mentioned special purpose acquisition, companies or specks. They have obviously been quite a big focus of the markets. We talked a lot about stocks on this podcast the past, but there's
and a broad based decline in speck returns and greater regulatory scrutiny. So what's the outlook for sparks and and each other alternatives. You mentioned, sure so into one of two thousand and twenty wine. We just saw record's speck issuance levels and it's really norm. All. I think natural, though, need have such an unbelievable uptake in terms of the supply to the market. Your NASH, you gotta, have some indigestion, and so, if it Well, that, alongside some other regulatory focuses on the net product, I think it's been healthy to see a pull back Can that issuance falling am just back issuance has come and from achieving high? Is it still incredibly important and viable product within the equity capital markets? For a whole Steve reasons and Currently, the entire market is working together to current more sustainability within that product annually of all the products composition of the product's creature.
yeah, and so that really means in terms of the forward for spats. Is that its positive, the mark in astronomy, open for speck issuance, but I think I'm currently for issuing clients and for investor hers forward we're getting too few to see a lot of innovation across the speck product, the direct listing product. The true shall I piano products, because it, is just the message and growing public and the method in terms of parting. Investors, and so have a lot of conviction and confidence that all of these products are here to stay. And will continue to see more evolution within them respectively. What types of company These are going public at this point are using any specific industry trends. We continue to see great diversification
and in terms of our issuing clients coming to market within the european space, and so we have very good growth oriented assets. They are coming to market, as all seemed very strong value, oriented assets coming to market. I think that talks the testament the capital formation that I spoke to earlier, but I also find it very encouraging that bath in that it, whether it's in the Americas region, are more international treaties to ring true and servicing great diversity a cross sector. Product and region, which is certainly very encouraging and obviously supports it at issue and spying- that's can't last year, but also the purse of this year, but talk a little bit about performance of deals. How bad subjecting the mindset of issuers and investors I mean. Obviously, we saw a bit of a barbell first half of the year. Salmon deals are performed and others underperformed. So what you expect the conditions to be going forward here? I think
temporarily to keep in mind some of the technical that you're, seeing specifically within the equity markets, just on sheer volume of supplied how it's been absorbed in. So it's only now for all that there is going to be at points in time. If the macro market becomes a bit more volatile, then try going to pull back and be a bit more selective in terms of whether working to play that capital and so over the this year we have obviously experience some points in time or volatility had increased. He saw pull back of risk appetite for leave us within the IP space Generally speaking, if you look out, for example, how IP performed on day wine. It's been positive across the board on a global perspective, so, for example, your average one performance in she, wine on a global perspective, was up thirty, five percent. If you look at you three, it was up twenty six percent, so yeah
sources times when markets have done a bit more trickier challenge that you ve seen a pull back in terms of their return, but the absolute return continues to very compelling for investors, so were unless you looking at an expected flood. of new instruments is also a question for you was he is you? Can the market really absorb this record? Issuance These levels are somewhat reminiscent, the extraordinary activity we saw in the late ninety, so I really are a top, I sure hope, as I certainly love brain, you achieved a market, some working with investing clients, but you're right I mean there is a tremendous amount of supplied is expected to come in September of the force of cheap, for I think the street in debt, Nellie absorbed that amount of supply, because there are some tremendous high quality issuers that our thinking and contemplating going to markets in the coming months. And the real question is: how do you kind of give the best advice to our clients? We really
very confident that the market is position in a place where it will be observing that supplies successfully inefficiently, although obviously doesn't do some bouts of industry for tee that will all have to pass through. So is there anything about the Marquis right. Now that has you worried what are the risks that you're watching so there's? Obviously, some more macro shot? We are definitely track gang in terms of indicators of risk sentiments, I'll hire a few of them, and I say this with a smile and my is as b c and d C is, on average touch all time high on an average of every three to four days, but we are focused and were focused on the macro and how a bite Shirley impact investor sentiment. So, from a macro perspective you see, we're very spoke guest on the upcoming said meeting, what type of signalling that areas in terms of tapering and, most importantly, the tangible impact on rates. I think like most people across it streets out we're not mislead concerned about rising rates, but were concerned about and focused on,
speed or the volatility around rates and has an impact, equity investor sentiment. I also think remain very, very focused on the performance of growth, oriented assets we're a training, are extremely high. Malta balls seeing a lot of jobs from the investments community to support that type of multiple, and so we see some great volatility. How does that impact on growth assets? Another topic, obviously that were focused son, is tax reform both for protects Isabel Capital gains tax, says and what is that really mean for the equity investor? If there are companies were sponsor funds or visas, He funds rolled into me be potentially monetize. Mother portfolio company is how does that impact investor sentiment in
search willing to underwrite primary offerings versus secondary offerings. Some are very so guess, obviously, on that type of macro events and then certainly were focused on the railway tory environment and had as at impact, are forward issuers globally in terms of their access to capital markets only in equities, but also just across the capital structure, and often related type of products and so on. Some of the macro items that be contained a trap and want to stay in front of in terms of raising our issuers I'm coming to market from a technical stand, why we strongly remain very focused on inflows passive inflows, verses, active and flows and from it tracking the numbers? There is certainly a difference in terms of the amount of passive money, that's flowing into the equity markets, which is very natural and supporting a lot of the indices performance and were also very focus on what per cent
enforcer going to active managers and without really means is no word as an individual portfolio manager want you enter a stock or by a stock based upon the inflows at their receiving, and is there a difference in terms of what market indices multiples are pointing out forces? Were you know, for fully a manager wants to actually enter a stock in terms of a multiple, so we're really focus on informed of our sittings, the very interesting technical to watch and then obviously more focus on in there for possession it so in Ireland gee. I, our research on mutual finds me Pugwash that essentially mutual son cash allocation, as per cent of their total EU, am sets in a record low of one point. six per sands forces? A history average, which is closer to two and a half per cent, and still what is really mean for a mutual fond of has more cash already into the system, and does that mean There are more selective in terms of their behaviour. Is at noon
they are actually more constructive and bush in terms of market and want to be fully investigated, as there were kind of tracking allotting how're investors. Positioning therefore fully owes across their capital structure, but also within your equities, domestically in the states, but also internationally as signals in terms of their risk appetite salute a couple of the macro more. The technical thing were certainly tracking that we are concerned in any way, shape or form about them. More urges that these are things that we want to make sure that we stay on top of in terms of tracking investor mindset, then, even beyond institutional investors, what about the retail investing space obviously until recently, the cetacean investors have typically bought up the lion's share of an appeal, but is that now changing your Rachel? eighty months has been a tremendous force within the market, not only in, as we know, the broad market in terms of fanatics from trading, but also has a follow
on buyer. In many ways within the european space, so were focus on is twofold. Why trying to get the best understanding of the psyche of abroad, retail investor base. What type of ass has been unwilling to contemplate capital and track with a knife? Yours, but also You know about the retail investor clients, and how can you turn it? That type of demand should really think about another kind of median of distribution, and so I and I think most people would agree. the retail investor is an remain mean. A very active within equity is, and we continue to want, to learn and track more in terms of their flows, and for This has a broad universe of investors, but I dont think in any way shape or form. I'm gonna go away and I still think you're in a sea very broad distribution in the IP space across all different types. I've been vesture is whether its institutional investors or retail investors across the board movie thinks much for joining us at? What is obviously a very busy time for you might
thank you so much for having me back includes this apple mode of exchanges are Goldman Sachs things, philistine and if you enjoyed the show, we hope is this I'm an apple podcast and leave a rating and comment, this podcast recorded on September and twenty twenty one all price references and market forecasts correspond to the date of this recording despots. Cash should not be copied distributed, published or reproduced in whole or in part. The information contained in this package does not constitute research or recommended from any Goldman Sachs Entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the statements or any information contained in this podcast and any law,
ability, therefore, including in respect of direct indirect or consequential loss or damage, is expressly disclaimed. The views expressed in this podcast or not necessarily those of Goldman Sachs and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs too. That listener, nor to constitute such person. A client of any Goldman Sachs Entity
Transcript generated on 2021-09-17.