Daily Brief: A Record-Setting Number Of IPOs Is Great News For Companies, Investment Banks, And Investors Alike

Daily Brief: A Record-Setting Number Of IPOs Is Great News For Companies, Investment Banks, And Investors Alike

over 2 years ago3 mins

Global companies are going up in the world: data out this week showed that the amount of cash raised by initial public offerings (IPOs) hit a new high in the first half of the year.

What does this mean?

According to Bloomberg, IPOs raised a record $350 billion in the first half of this year, beating the previous six-month record of $282 billion in the second half of 2020. This year’s IPOs have been a very different breed too: think more renewable energy companies and online retailers than tech stocks and special-purpose acquisition companies (SPACs).

The boom is being fueled by the flood of cash central banks are pumping into the global economy, as well as by the rise of individual investors who are increasingly keen to buy into their favorite companies. And the party’s likely to keep going as long as the stock market keeps on rising – so much so that this year’s total proceeds are expected to top 2007’s full-year record of $420 billion.

IPO boom

Why should I care?

For markets: US banks are back in action.

The IPO boom is panning out well for investment banks, which generate dealmaking and advisory fees from every IPO they work on. Good news for their investors too: banks can use that windfall to reward shareholders in the form of dividends and share buybacks. And that finally includes US banks, which were restricted from doing just that during the pandemic. They passed the US Federal Reserve’s stress test last week, proving they can easily withstand a severe recession and give loyal shareholders the boost they deserve.

The bigger picture: Here today, gone tomorrow.

SPACs accounted for almost half the IPO proceeds raised in the first quarter, but their share has shrunk to just 13% this quarter. Investor appetite is probably fading because of the increasing regulatory scrutiny on the space, not to mention their poor performance: a popular index tracking SPAC listings has dropped by almost a quarter from its February high.

SPAC rush

Keep reading for our next story...

American Millennials Are Struggling To Get By

Millennials image

So no one told US millennials life was going to be this way – clap clap clap clap – but research out this week showed 70% of young people are living paycheck to paycheck.

What does this mean?

According to analysis from LendingClub, a surprisingly high proportion of Americans aged between 25 and 40 are struggling to get by. The coronavirus-induced recession – the second for many millennials after the 2008 financial crisis – has dented their ability to build wealth, keeping earnings low even as the costs of education, housing, and healthcare keep rising. Even millennials who have great salaries aren’t immune: 60% of those making over $100,000 a year are reportedly struggling to balance their lifestyles with their pay packets. That stretched-thin feeling could herald a major economic headache further down the line too: if millennials avoid having kids because of the costs involved, it could hit the US population growth rate and, by extension, its economic output.

Paycheck to paycheck status
Source: PYMNTS, LendingClub

Why should I care?

For markets: Millennials eat danger for breakfast.

The extent of millennials’ financial problems might explain why trading volumes among retail investors hit a record high last year: the stock market crash provided an ideal entry point for those looking to make some much-needed cash. Still, this move into risky day trading is completely at odds with the passive investing and exchange-traded funds that have been booming since they came of age, and it could easily end up backfiring.

Zooming out: Binancial misconduct.

The promise of once-in-a-generation returns has likewise attracted millennials to arguably the riskiest market of all: crypto. Financial authorities around the world, then, have been scrambling to protect overoptimistic investors, which might be why the world’s busiest cryptocurrency exchange, Binance, has been under the microscope. And following recent warnings from the US, Canada, and Japan, the UK finally showed its hand: it banned Binance from conducting any regulated activity in the country on Monday.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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