SPIRITS: Equity animal spirits are reawakening after 18 months of hibernation. The S&P 500 is in bull market territory. Market volatility low. Tech stock leadership is starting to broaden. Whilst bearish investors are capitulating and chasing markets higher. Even the long dormant M&A and IPO markets are now showing signs of life from depressed levels. In a further sign of improved company and investor confidence. Markets will need the further validation of less inflation, and have to endure a coming growth slowdown, but the foundations are firming. The bigger picture remains one of buybacks and delisting’s still dwarfing IPO’s, and restricting stock supply.
IPOS: The initial public offering winter is starting to thaw. Last week US restaurant chain CAVA was the first to raise its IPO price range in 20 months. Its share price then doubled on the first day of trading. The Renaissance recent IPO index surged 31% this year, double the S&P 500, with 11% of that just month-to-date. The broader tech rally has played a big part, with over 50% of recent IPO prospectuses referencing AI. The IPO pipeline is filling up again, led by company spin-offs. From SoftBank’s UK semiconductor design arm ARM, to ThyssenKrupp’s (TKA.DE) green hydrogen subsidiary Nucera, and SinoChem’s China relisting of agchem giant Syngenta.
DE-EQUITISATION: This IPO rebound, along with the broader recovery in investor sentiment, is in its early stages. The $8 billion US IPO proceeds this year pales next to the $140 billion in the 2021 boom. It’s also tiny vs the annualized $800-900 billion of S&P 500 share buybacks. Whilst the CAVA success came the same week as WE Soda was forced to scrap its $8 billion UK IPO. More broadly the number of stocks listed on the NYSE is still down 16% since the recent peak of 2,900. So despite the turn up in sentiment, the broader story is one of a still significant stock supply squeeze being an under-appreciated support for continued equity market performance.
All data, figures & charts are valid as of 19/06/2023