While US ECM market share is consolidating among a few large banks, Cowen has managed to differentiate its practice by supporting companies through their growth stages and beyond, making it IFR’s US Mid-Market Equity House of the Year.
Investment banks that serve the middle market are under pressure from much larger banks that are going “downmarket” to squeeze out more market share.
To weather the onslaught, Cowen partnered with the larger ECM firms in sectors where its expertise could add value.
To that end, the New York-based bank differentiates itself by combining research coverage of 800 companies across seven sectors with a complementary sales and trading platform and a senior banker on every deal.
“Clients get more for their dollars when they hire Cowen,” said Grant Miller, Cowen’s head of capital markets. “Our clients get a senior managing director leading every deal. That’s not always the case in the bulge bracket.”
Cowen’s rise in US ECM over the past few years has coincided with a sustained period of healthcare issuance, specifically biotech IPOs – a sector where superior research coverage is highly valued.
The bank finished third in healthcare ECM during the IFR Awards period – up a position from last year – with US$2.3bn of credit across 51 deals, including a dozen IPOs.
Cowen’s largest healthcare mandate this year was Adaptive Biotechnologies where it was a bookrunner alongside Goldman Sachs, JP Morgan and Bank of America on a US$345m IPO.
Biotech IPOs are critical assignments for Cowen because of the repeat business that they provide over time.
Cancer drug developer Blueprint Medicines, for instance, has become a serial issuer of equity since it went public in 2015.
Cowen was a bookrunner on Blueprint's IPO, alongside Goldman Sachs, as well as the four Blueprint follow-ons since then. The most recent was a US$345m follow-on in March that was led by the duo.
Cowen also led the first true Nasdaq IPO of a Canadian cannabis grower, Tilray, in the summer of 2018 and built on that with a US$400m at-the-market equity programme in September 2019. Cannabis is illegal at the federal level in the US and the initial enthusiasm for weed stocks has faded, but for Cowen it is a natural fit with two of its main sectors, healthcare and consumer.
But there is more to Cowen than healthcare and cannabis.
Bookrunner assignments on IPOs of Peloton Interactive (US$1.16bn), Grocery Outlet (US$435m) and The RealReal (US$300m) were all big wins for Cowen this year.
Peloton combined healthcare and technology; Grocery Outlet is a traditional high-growth retailer; and RealReal is a social media-influenced online retailer.
"Outside of healthcare, we have to look at every situation and consider how it may be used against us or help us on the next deal," said Larry Wieseneck, co-president at Cowen.
As a consequence, Cowen took a demanding stance when it pitched Peloton.
The client’s business matched up well with Cowen’s platform, specifically its strong buyside connections and research coverage in interactive media.
“We would only take a position that is commensurate with our effort,” said Miller.
The gambit paid off. Cowen was the only mid-market firm to be hired as a bookrunner on Peloton's IPO.
Grocery Outlet was one of only a few companies this year that was able to price a first-time follow-on within the lockup period of its IPO, especially notable given that it had priced its IPO well above guidance.
RealReal is at the opposite end of the technology spectrum from Grocery Outlet, an online luxury consignment store with only a handful of stores that exist in the real world.
But Cowen's push into technology more broadly is just getting started.
The bank hired a team of bankers last year that has been tasked with providing private financing solutions for emerging software and internet companies.
Cowen’s approach to the tech sector looks a lot like its healthcare practice.
“Our strategy in technology is to go in at an early stage and build our credibility from there," said Miller.
Add this all together and the numbers show that Cowen was a bookrunner on 67 deals for combined league table credit of US$3.2bn during the awards period, ranking 11th in the combined US equity league table, advancing two places from the previous year.
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