US ECM eases into holiday mode

IFR 2513 - 09 Dec 2023 - 15 Dec 2023
Quick read

US ECM bankers expect to price some follow-on stock sales in the coming week but see activity starting to wind down ahead of the holiday season.

The past week saw no IPOs (none have been priced and none are expected to in December) but syndicate desks rushed to price 17 follow-ons for proceeds of US$3.55bn, the largest being Clayton Dubilier & Rice's sell-down of a US$537m holding in water pipe distributor Core & Main. One banker said the past week was this month's best opportunity to price offerings and expected less activity for the rest of the month.

The impending slowdown reflects not just the approaching holiday season but also caution around some potentially market-moving events/ economic releases in the coming week, including Tuesday's US CPI data and Wednesday's FOMC meeting outcome. Still, the latter should reinforce expectations that the Federal Reserve is done raising interest rates in this cycle, aiding funding conditions.

The past week's burst of activity coincided with a weaker equity market backdrop, though most offerings traded above their offer prices in the aftermarket in an encouraging sign for future issuance. Through to early Friday, the S&P 500 was on track to break a five-week winning streak that has underpinned solid secondary ECM deal flow.

Looking ahead to next year, bankers expect to bring some IPOs to market quickly in January. IPO performances have improved recently, but alpha from new issues has still badly lagged the equity benchmark this year.