Wall Street welcomes biggest IPO boom in decades

By Julia Horowitz, CNN Business

A resilient stock market, fueled by central bank and government stimulus measures, is driving record numbers of companies to raise funds by offering stocks in public markets. It was a huge boon for the Wall Street banks who orchestrated the transactions.

“I honestly thought last year would be the busiest in a couple of decades,” said Aloke Gupte, JPMorgan’s co-head of equity capital markets for Europe, Middle East and the United States. Africa. “This year has far surpassed that.”

What’s going on: In the third quarter, which ends Thursday, 94 U.S. initial public offerings, or IPOs, raised $ 27 billion. This makes it the best July to September period in terms of number of transactions since 2000, according to a report by investment bank Renaissance Capital.

Globally, 2,044 new listings have brought in about $ 468 billion since the start of the year, according to Dealogic data compiled for CNN Business. This has already broken a record in 2020, when 1,656 transactions raised nearly $ 358 billion.

The third quarter includes the generally slower summer period, when the volume of transactions decreases and bankers take vacations. Activity slowed down in August, but the overall schedule was extremely busy.

Healthcare and tech were the most active sectors, driving two-thirds of U.S. IPOs for the quarter, Renaissance Capital said. He also noted an increase in the number of consumer companies going public, including drive-through coffee shop chain Dutch Bros., Swiss shoe brand On and grill maker Weber.

Remember: this is also the neighborhood that brought Robinhood to the Nasdaq. The trading app raised $ 2.1 billion – less than expected, but still a significant amount.

Gupte pointed to a number of factors behind the recent boom, including the economic recovery, which pushed equities higher, and strong valuations across all sectors.

It also helps: Firms that exploit public markets saw stocks perform well early in the session, with many profiting from huge pops on day one – an important marker for both newcomers and banks. that help to evaluate actions.

The share of eyewear startup Warby Parker, which began trading on the New York Stock Exchange on Wednesday following a direct listing (which is slightly different from an IPO) ended Day 36. % above its benchmark price of $ 40.

Why it’s important: Gupte said the success of recent IPOs encourages companies to go public earlier in their lives – a significant change from the past few years, when many startups chose to stay private longer.

And while he believes next year could be more difficult, with smaller windows of activity, he doesn’t expect market volatility to derail momentum, with a long list of agreements in progress.

“Every time the market goes down, it comes back and [reached] a new high, ”said Gupte. “A very, very high class of companies are lining up to go public. “

On the radar: The Financial Times reports that the recent deal frenzy in the US and Europe has not spread to Hong Kong, which is set to experience its worst quarter for new listings since early 2020. The biggest factor is Beijing’s crackdown on private companies. , which makes businesses nervous about registering in the region.

Dollar Tree will sell more things for over $ 1. Investors love

For decades, Dollar Tree sold most of its products for a dollar. Now he is adding items with higher prices in thousands of stores.

The company said it will start selling items at $ 1.25 and $ 1.50 in select locations for the first time, reports my CNN Business colleague Nathaniel Meyersohn. It will also add $ 3 and $ 5 items to more stores, developing a recent strategy to move away from offering only $ 1 products.

Investors were delighted with the news. (No surprise: the new approach to pricing will ostensibly encourage customers to spend more per trip.) Shares jumped 16.5% on Wednesday.

Time Machine: Dollar Tree has come under pressure from Wall Street in recent years to raise prices. In 2019, an activist investor took a stake in the company and pushed the channel into action. The group ended its fight after Dollar Tree announced plans to test different pricing options.

Yet this decision is also a response to worrying trends. CEO Michael Witynski told the Wall Street Journal that adding items above $ 1 was in part a reaction to rising costs. In August, the company lowered its profit forecast for the year, citing the impact of rising shipping costs.

“We recognize the need to make adjustments in the current economic environment,” Witynski said. The company must take into account “the pressure we are all under on wages, freight and on our suppliers and cost increases,” he continued.

Watch this space: Rising prices carry the risk of discouraging buyers, especially for chains that target the tightest budgets.

“Dollar Tree should benefit from changes in its pricing strategy, although we are concerned about customer reaction given their high price sensitivity,” Telsey Advisory Group’s Joseph Feldman said in a note Wednesday.

Inflation is a nightmare. Especially when it hits bacon

Post-containment inflation worries policymakers around the world, who fear that prices will spiral out of control if supply chains remain clogged and workers start demanding higher wages.

Something that is on the US government radar? Bacon.

The price of popular breakfast food is higher for Americans than it has been in 40 years, reports my CNN Business colleague Alicia Wallace. The average price of a slice of bacon has jumped nearly 28% in the past 12 months, according to government data.

Setback: The national pork supply chain was one of the fastest to go haywire when Covid-19 hit. The facilities have closed and the backlog of animals has increased. Millions of pigs have been euthanized without being processed into food.

Pork production is expected to end the year down 2% from 2020 levels, IHS Markit economist Adam Speck told Alicia. Demand, meanwhile, was “exceptional”.

Experts don’t expect these issues to be resolved quickly. They are also concerned about the re-emergence of African swine fever, which emerged in the Dominican Republic over the summer.

The Biden administration is taking action. Its team of economists said prices are high because a handful of large companies control the majority of market share, and presented plans to level the playing field earlier this month.

Will greater enforcement of antitrust laws, pricing investigations, and support for new market entrants solve the problem? Hungry Americans, at least, should stay tuned.


CarMax, Bed Bath & Beyond and McCormick publish their results before the US markets open.

Also today: Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen testify on the pandemic response to the House Financial Services Committee starting at 10 a.m. ET.

Congress is also rushing to avoid a government shutdown. Senate Majority Leader Chuck Schumer announced Wednesday night that Democrats had reached agreement with Republicans on an interim bill to maintain government funding until early December.

Don’t Miss This: Today at 12 p.m. ET, CNN Business presents “The Foreseeable Future: Cryptomania.”

Join CNN presenter Julia Chatterley for a conversation with Galaxy Digital CEO Mike Novogratz, followed by a panel discussion with Guapcoin Founder Tavonia Evans, SEC Commissioner Hester Peirce and Sydney Schaub, Gemini Legal Director . To reserve a spot now, RSVP here.

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