US Mid-Market Equity House: Stifel

IFR Awards 2023
4 min read
Robert Sherwood

Leading the pack

Coming out of a slow year for new issues, Stifel proved investors were ready to buy IPOs in 2023 and support them in the aftermarket. For reopening the IPO market and taking more companies public than its competitors, Stifel is IFR’s US Mid-Market Equity House of the Year.

IPOs often mark the start of long and fruitful investment banking relationships. By that score, Stifel distanced itself from mid-market peers in 2023.

The bank was a bookrunner on nine of 32 US-listed IPOs priced during the year, trailing only much larger rivals such as JP Morgan (14) and Goldman Sachs (12). Equally apportioned across bookrunners, the US$560m of IPO business credited to Stifel was a 2.9% share of the US$19.5bn of deals priced during the year, according to LSEG data.

Stifel was present on significant transactions, particularly within sectors such as consumer, natural resources and speciality finance that are a hallmark of mid-market banking.

Skyward Specialty Insurance and its US$154.4m IPO is evidence of Stifel’s leadership in what was (and remains) a fragile market backdrop.

"Accounts told us in late 2022 they might support Skyward’s IPO in the first quarter of 2023," said Victor Sack, head of ECM at Keefe, Bruyette & Woods, the FIG-focused boutique Stifel acquired in 2012. "We took that to mean launching in the first week of January."

KBW, joined by one other bank as lead bookrunners, publicly launched the IPO on January 4.

Informed by investor feedback from confidential marketing, KBW advised that the offering be structured with a large secondary component to cash out an eclectic and long list of investors that had funded Skyward since its formation in 2006.

Shareholders provided 4.2m shares of the 8.95m sold in the IPO plus all the greenshoe. The strategy was to remove the overhang of disorderly sales post-listing and allow investors to focus on secondary selldowns by principal backer Westaim.

Skyward returned with an all-secondary follow-on offering of 3.85m shares at US$23 in June, versus US$15 IPO pricing, and another 5m share sale in November at US$30.50 that was upsized and included a primary component. Those offerings allowed Westaim to reduce its ownership stake to 17.5%.

"We got the minority shareholders cleaned up and the sponsor monetised all within a one-year period when the IPO market was supposedly shut," said Sack.

As the first IPO of the year, Skyward provided a template for execution of confidential marketing to generate momentum, including secondary shares to alleviate overhang, and differentiated roles of investment banks as bookrunners.

Stifel did accept smaller roles as a bookrunner on the US$316.8m IPO of restaurant operator Cava Group in June, as well as smaller cuts of biotech IPOs for Apogee Therapeutics (US$345m) and Neumora Therapeutics (US$250m). That is consistent with an investment banking practice supported by deep research coverage.

Stifel tapped into its high-net-worth client base with a US$100m IPO in January of TXO Energy, a master limited partnership focused on oil production whose returns are predicated upon paying a high proportion of cashflows generated to shareholders. A similarly structured US$190m IPO of Mach Natural Resources followed, an MLP headed by industry veteran Tom Ward.

Investment banking has grown through acquisitions, including the purchase of biotech advisory Torreya Partners in March and recruiting a team of ex-Silicon Valley Bank venture capital bankers that same month. The bank affirmed its commitment to tech banking by poaching industry veteran Cullen Lee to head tech ECM in October.

"The market is unbelievably competitive for the dollars that are out there," said Seth Rubin, Stifel’s head of US ECM. "We feel good about things we have done that put us in a position to win business."

Stifel narrowed that competitive gap by backstopping an acquisition by Casella Waste Systems with a US$200m loan. That commitment resulted in a joint bookrunner mandate on the US$450m equity market takeout, an elevation from the co-manager roles on prior equity deals.

Rubin points to a bookrunner mandate on Xenon Pharmaceuticals’ US$320m follow-on offering in November, the sixth equity raise since Stifel helped take the biotech public in 2016, as a sign of good work over the years.

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