Speaker 1: These sees Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Stinebeck on Bloomberg Radio. Alright, Mike, let's talk about the
Speaker 1: ip O business, one of my favorite businesses. I did
Speaker 1: a ton of IPOs back in the day. It's always
Speaker 1: fun bringing a new company to market. See how the
Speaker 1: management team does in front of investors, See how investors
Speaker 1: react to you know, new stories, new management teams, um
Speaker 1: and uh, not so much. This year, I'll talk about
Speaker 1: something else that's dead. You know, you got tumble weed
Speaker 1: blowing through the IPO IPO desks and exactly right, and
Speaker 1: they're gonna see it in their bonus checks. Unfortunately, are
Speaker 1: good friends there. But check this data out Ernst and Young,
Speaker 1: that's how I refer to them. But their e Y,
Speaker 1: that's their their new branding EY. Reaching least, it's quarterly
Speaker 1: IPO data report which shows overall deal proceeds dropped and
Speaker 1: a number of deals dropped seventy percent. I don't think
Speaker 1: I've ever seen numbers like that. So let's stake into that.
Speaker 1: We can do that with rape. Rachel Garring, I p
Speaker 1: O leader, uh tough business in two for Uy Americas.
Speaker 1: She joins us via zoom from Nashville, Tennessee. Rachel, thank
Speaker 1: you so much for joining us here. I don't think
Speaker 1: I've ever seen numbers like that. Help give us some
Speaker 1: contexts for what happened in the I p O market
Speaker 1: this year. Well, the I p O market certainly took
Speaker 1: a reverse turn from what we saw in roughly ninety
Speaker 1: I p O s um here in the US, which
Speaker 1: is the lowest number in volume that we've seen since
Speaker 1: two thousand and nine, eight point six billion in proceeds raise,
Speaker 1: which is the lowest in proceeds raised we've seen in
Speaker 1: over two decades so far from what we saw in
Speaker 1: one that broke records, going all in the opposite direction. Well,
Speaker 1: it's a good point, you know, these year over year
Speaker 1: numbers are comparing the market to a just a bonanza.
Speaker 1: Everyone was coming to market, uh, spacks and everything else
Speaker 1: in I guess so that that's part of the story
Speaker 1: behind that huge percentage shop. But Rachel, how does this
Speaker 1: look now going forward? Or is there now a bottleneck
Speaker 1: of I p O s that we'll see in three
Speaker 1: if the conditions are a little bit better, you know,
Speaker 1: can we expect to see a lot of deals that
Speaker 1: were canceled sort of come come to market next year.
Speaker 1: It's hard to say what certainly has been impacting the
Speaker 1: I p O market for twenty two. And I've heard
Speaker 1: in your earlier segment those those headwinds that all companies
Speaker 1: are facing, you know, are not going to change course
Speaker 1: immediately in three. So expect a slower start in in
Speaker 1: twenty three, hopeful for the back end of twenty three
Speaker 1: for volatility to settle out and the market to reopen,
Speaker 1: and then certainly into twenty four we can start to
Speaker 1: be optimistic as well. But we we need you know,
Speaker 1: come needs to come to market that have strong performance,
Speaker 1: strong profitability. Those are what those are the types of
Speaker 1: companies that are really going to attract investors on the onset.
Speaker 1: All right, well, given that backdrop Rachel is the sack
Speaker 1: market dead, I don't think this back market is dead.
Speaker 1: We're not going to see the volumes that we've seen
Speaker 1: in UM. We need three things to happen with SPACs. One,
Speaker 1: some of the backlog needs to be cleared out, so
Speaker 1: we will continue to see liquidations and then hopefully also
Speaker 1: some deal announcements in mergers to be completed. We also
Speaker 1: need the regulatory overhang to clear out, so final rulemaking
Speaker 1: from the SEC and then um third is overall market
Speaker 1: perception really needs to improve around SPACs, and so that's
Speaker 1: going to start with performance of those companies that already
Speaker 1: completed a DESPAC to start to improve and really drive
Speaker 1: some um improved investor perception. You know, Rachel Paul made
Speaker 1: a good point about the actual bankers, the humans involved
Speaker 1: in all these deals. What do you think most banks
Speaker 1: do do they do they keep these bankers around in
Speaker 1: case there is a rebound or maybe you know, if
Speaker 1: things get bad enough, there's a lot of secondary offerings
Speaker 1: to work through. What what is you know, kind of
Speaker 1: the mood of the bosses, of the bankers, of of
Speaker 1: ip O desks going into Yeah, it's hard for me
Speaker 1: to say in terms of, you know, the exact mood
Speaker 1: um in the on the banking side of the house.
Speaker 1: But the one thing I would say is we've been
Speaker 1: here before. We've seen retrenchments in I p O activity
Speaker 1: like we're experiencing right now, and we've also seen the
Speaker 1: quick recoveries that come. So it's hard to predict exactly
Speaker 1: when that I p O recovery will occur, but when
Speaker 1: it does, it comes quickly, and the markets certainly improved,
Speaker 1: so I think we can all weather through this storm.
Speaker 1: And right now, companies are focused on taking this time
Speaker 1: to be focused on the business, focused on their fundamentals,
Speaker 1: shoring up and preparing to go public, which is looking
Speaker 1: at their talent and taking um, taking um the advantage
Speaker 1: of the market right now to really attract you know,
Speaker 1: strong talent and improve business performance. Did you think it's
Speaker 1: a lower interest rate environment sort of a prerequisite to
Speaker 1: get I p o s to market? Uh? You know,
Speaker 1: is it just get those animal spirits going again when
Speaker 1: money is cheaper. We don't think that low interest rates
Speaker 1: that we've experienced, you know, for for a number of
Speaker 1: years is a necessity. I think what we need is
Speaker 1: just um. We need the interest rates just to level out.
Speaker 1: We need a level of um predictability. But we've had
Speaker 1: I p o s in high interest rate environments before,
Speaker 1: so interest rates coming down to what we've been experiencing
Speaker 1: close to zero is not a necessity, Rachel. One of
Speaker 1: the drivers historically for initial public offerings has been, uh,
Speaker 1: you know, the private equity business. They're bringing some of
Speaker 1: their portfolio companies public. Do we have any kind of
Speaker 1: information on maybe the backlog there will private equity sponsored
Speaker 1: companies be a source of IPO activity when the market
Speaker 1: does come back, certainly, UM, We definitely expect when the
Speaker 1: market starts to reopen, PE will be a strong UM
Speaker 1: influencer of those companies coming to market. Right now, PE
Speaker 1: is being cautious where with where they put their investments
Speaker 1: UM today, and we're seeing them place more investments into
Speaker 1: their current portfolios UM and helping those portfolio companies really
Speaker 1: prepare UM be you know, improve their strength and viability
Speaker 1: through you know these you know, you know, unpredictable times
Speaker 1: that everybody's facing right now, you know. H I wonder
Speaker 1: geographically if there were any areas of the country that
Speaker 1: were hit harder in this slowdown in I p O
Speaker 1: s than others geographically UM hard to say, particularly across
Speaker 1: the US if that's your focus, but certainly the text
Speaker 1: sector overall. So then you could say the West Coast
Speaker 1: UM has been you know hit in and outside me
Speaker 1: and are a lot of that is really when you
Speaker 1: think about those who went public in one and their
Speaker 1: performance today currently trailing well below the market UM, does
Speaker 1: not bode well for the tech sector, and so that's
Speaker 1: been impacting certainly that West coast. Yeah, and I kind
Speaker 1: of follow up on that a little bit. I mean,
Speaker 1: there was a call to be made over to last
Speaker 1: I don't know, really a dozen years. There's so much
Speaker 1: venture capital money out there, so much private equity money
Speaker 1: out there, that a company really didn't need to come public,
Speaker 1: or did need to come public as soon as maybe
Speaker 1: it historically did, it could wait a little bit. Is
Speaker 1: that still the case, or is some of that VC
Speaker 1: money and PE money kind of I don't know. Pulling back,
Speaker 1: maybe I would say there's certainly a lot of dry
Speaker 1: powder still out there with PE and VC. They're they're
Speaker 1: definitely being more cautious in how they put that money
Speaker 1: to work. We'll see how UM that trend continues throughout
Speaker 1: three But they're proceeding in making investments cause just Lee
Speaker 1: and UM, you know, carefully reviewing UM. What they're looking
Speaker 1: to invest in. E S G is a prime topic
Speaker 1: that UM a lot of that. We're seeing an increased
Speaker 1: focused UM from PE in particular through due diligence and
Speaker 1: so forth. But I definitely think PE and BC will
Speaker 1: continue putting their funds to work UM and that will
Speaker 1: always provide companies, you know, opportunity for additional capital. But
Speaker 1: with rising rates the cost of debt, that's certainly going
Speaker 1: to impact PE and VC. So that's where the math
Speaker 1: and the I p O math may start to work,
Speaker 1: may not for certain companies who just need the capital.
Speaker 1: All right, Rachel, good stuff, will really appreciate it. Rachel Garring,
Speaker 1: I p O leader for e Y America's joining us
Speaker 1: via zoom from Nashville, Tennessee. And I'll read that data again.
Speaker 1: I mean, I don't think I've ever seen that. E
Speaker 1: Y recently released its quarterly IPO data report, which shows
Speaker 1: overall deal proceeds drop nine and you get the numbers here,
Speaker 1: A hundred fifty five billion last year, nine billion years.
Speaker 1: Go figure man. I will say, though, Paul, you know,
Speaker 1: and listeners on the radio can't see this. But Rachel
Speaker 1: has the most festive zoom background. Is it's very good.
Speaker 1: Good to see her holiday spirits not been impacted. Rachel.
Speaker 1: Gearing from e Y America is good stuff. They're looking
Speaker 1: at these markets again. We closed higher today, you know,
Speaker 1: we'll take that. I mean it was a week and
Speaker 1: it's good for a Friday. We've got Christmas eve Eve
Speaker 1: and we'll come back. We'll finish out the year next week,
Speaker 1: and then we'll start off a new year, hopefully a
Speaker 1: better year for equity and fixing the markets. This is
Speaker 1: Bloomberg