Equity fundraising slammed to a halt in the wake of Silicon Valley Bank’s collapse, and now the turmoil at Credit Suisse Group AG is dashing hopes for a recovery anytime soon as investors flee anything that smells like risk.
(Bloomberg) — Equity fundraising slammed to a halt in the wake of Silicon Valley Bank’s collapse, and now the turmoil at Credit Suisse Group AG is dashing hopes for a recovery anytime soon as investors flee anything that smells like risk.
Just one stock offering by a US-listed company has priced since Friday, according to data compiled by Bloomberg that excludes deals worth less than $10 million. And there have been no offerings brought by selling stockholders in that span. That’s a jarring switch from recent weeks, when companies and their largest investors were pricing equity offerings at the fastest pace in a year.
“Clearly this type of volatility and market uncertainty will result in a continued slowdown in equity and equity-linked new issues,” said Seth Rubin, head of equity capital markets at Stifel. “The market needs a period of sustained stability before investors are willing to put new capital to work in transactions at reasonable levels.”
This week’s only sizable offering, Ormat Technologies Inc., raised $300 million. Last week, sellers took in $3.8 billion from more than a dozen deals, and the week before they raised more than $4.9 billion in at least 17 secondary offerings.
Behind closed doors, bankers are advising most clients to hold off on deals until there’s more clarity, Steve Maletzky, head of equity capital markets at William Blair & Co., said in an interview.
“There’s a lot of uncertainty in the market across not only the banking industry, but now you also have uncertainty around the Fed again and which direction around interest rates are going to be moving,” he said. “That’s put investors back on the sidelines.”
Disappointing Pivot
The pivot in strategy is a disappointment for issuers who were preparing to capitalize on the recent run-up in stock offerings, Maletzky added.
Mounting concerns over financial stability has prompted a selloff in risk assets and a surge in Treasuries as bond traders abandon bets on additional rate hikes and begin pricing in cuts by the Federal Reserve. The headwinds for equity fundraising come alongside a slowdown in debt offerings, where the steep drop in Treasury yields is sparking hesitancy from syndicate desks to sell new debt.
“When there’s so much market noise, short term, it will absolutely impact the willingness of issuers to go to the market,” Ewout Steenbergen, chief financial officer at S&P Global, said on Monday.
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Dealmakers were hesitant to forecast how long the funding slowdown will last, pointing to the uncertainty surrounding the banking sector and the changing rate outlook. But some groups are already emerging as the especially vulnerable, such as the financial technology industry, Bloomberg analyst Diksha Gera wrote in a note this week.
“Investors are likely to be much less forgiving for smaller, loss-making fintechs and access to liquidity and capital could remain tight, due to risk-off sentiment even with significant dry powder in markets to deploy money,” she wrote.
Fintechs that went public since 2019 have burned more than $10 billion of cash in the past year alone, she added.
–With assistance from Nina Trentmann.
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