Emergency corporate fundraising and a clamour for tech stock market listings pushed equity capital market volumes to over $1 trillion in 2020 and fees for investment bankers in the sector to a record high, data showed.
As the COVID-19 pandemic raged across the world, companies turned to their shareholders in droves to get the funding needed to get through a bruising global recession.
Combined with demand for new growth-oriented companies -- particularly tech -- in an era of record low interest rates, that was responsible for a record-shattering year in stock market fundraising, bankers and analysts said.
Global equity capital markets (ECM) activity rocketed by 55% to a record $1.1 trillion in 2020, data from Refinitiv showed.
The year was characterised by companies spanning from airlines to retail and hospitality scrambling for funds to weather the pandemic or to repay emergency government loans.
Airlines operators such as Lufthansa and British Airways owner IAG led the way, tapping markets for billions of dollars to navigate a severe crunch in the sector.
But as the year progressed and as unprecedented central bank action supercharged markets, a slew of initial public offerings hit the market, pushing IPO volumes in the United States to a 13-year high of $80.23 billion, the Refinitiv data showed.
These were characterised by unprecedented first-day pops, with the likes of Airbnb and Warren Buffet-backed Snowflake doubling in value on their market debuts.
"In a world of incredibly low interest rates, any company able to demonstrate growth in future cash flows is going to be rated highly. Sectors such as healthcare, fintech and tech are a huge part of this," said James Fleming, Citi’s global co-head of equity capital markets.
Fleming expects the trend of tech IPOs to continue into the first half of 2021, while equity raises for balance-sheet purposes are also likely to continue into the new year with many sectors yet to fully recover from the COVID-19 crisis.
While the United States has been at the forefront of the IPO boom, the trend is likely to spread to Europe in 2021.
Overall, bankers made $28.7 billion from ECM fees, the biggest yearly pot ever. IPO fees also hit a 13-year high of $10 billion, the data show.
Those figures rise to $32.5 billion and $13.8 billion respectively when including the listing of so-called special purpose acquisition companies (SPACs), though the fees on such deals are only payable in full if the vehicle ends up acquiring a company.
Issuance in 2021 could be supported by a continued surge in mergers and acquisition activity.
"In Europe, we will see much more M&A-related equity financing in 2021 across a broad range of sectors, as opposed to just balance sheet repair situations," said James Palmer, head of EMEA ECM at Bank of America.
The cancellation of Ant Group's planned $37 billion listing -- in what would have been the largest IPO in history -- was the one fly in the ointment. It raised the threat of regulatory hurdles for tech firms, particularly those with operations in China.
But with more positive news around vaccine rollouts emerging across the world, investors are also expecting to see the flow of IPOs continue unabated.
Companies that were satisfied with private funding rounds in the past are now coming to the public market to take advantage of buoyant stock market valuations.
"There is a pendulum shift that's ongoing," said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management. "As long as valuations stay high, there is an incentive for private equity to go to market."