A relatively drama-free week despite recent banking turmoil and rising recession talk has given syndicate bankers reason for hope that the struggling US ECM business will fare better in the second quarter.
The first quarter closed on Friday with growth stocks having again found a bid to offset pressure on regional banking stocks.
Yet ECM activity remains subpar, the past week bringing no IPOs, only three biotech follow-ons for proceeds of US$525m and a backstopped US$100m overnight deal from struggling Nikola (plus a CB offering) to keep bankers occupied.
According to Refinitiv data, secondary issuance has risen 26% in 2023 versus the same (depressed) period last year.
Follow-on activity had started to heat up in late February and early March before the collapse of SVB Financial again dampened activity, though some believe the funding window could open up over the next few weeks as the earnings season gets under way.
One banker said issuers would need to move quickly to exploit any open windows during this period, even if that meant they needed to pre-announce earnings.
Meanwhile, the IPO market remains frozen with only eight US$50m-plus pricings this year so far and volumes down 9%, and bankers expecting few launches near-term. Johnson & Johnson's consumer health unit, Kenvue, amended its IPO filing on Thursday amid expectations that it could launch a circa-US$5bn IPO later in April.
Bankers are generally wary of declaring the all-clear after investors were rattled in March by a string of smaller bank collapses, putting pressure on other banks and raising concerns that tighter credit conditions will tip the US economy into recession later this year.
But as of early Friday, the tech-heavy Nasdaq Composite Index was on track to deliver its best quarter since tech stocks surged in 2020, in part as investors positioned themselves for potential interest rate cuts later this year. However, valuations still have not recovered enough to spark the return of tech IPOs.