Riding high on blank-check listings boom, global IPO headed for its biggest first quarter

Both the traditional and SPAC listings have been fuelled by unprecedented monetary and fiscal stimulus, ultra-low interest rates and global markets at record levels, until recently at least.

Like South Korean e-commerce giant Coupang Inc., backed by SoftBank Group Corp., boosted the price target for its US IPO, crossed that range and then soared 41 per cent on its first day. It raised $4.6 billion this week in the biggest US listing in the last two years since Uber Technologies Inc. Another debutant, dating app Bumble Inc. also surged last month after raising a greater-than-expected $2.15 billion.

But blank-check firms could prove to be a trickier sell, with the US Securities and Exchange Commission “taking a hard look” at disclosures and other structural issues.

Blank-check companies are those, which raise money in a listing and use that to acquire a private firm within two years. And everybody who is anybody, from sports figures to former US House Speaker Paul Ryan, Asian business tycoons and big European bankers, has one.

Now, markets are also see-sawing with investors fretting about the rising bond yields and the so-called pandemic-winner stocks losing traction. An index that tracks SPAC listings has dropped 17 per cent from a February high, with worries mounting about a bubble in that corner, while the US market regulator has cautioned retail investors against celebrity-endorsed cash shells.

“Volatility will weigh on the IPO market to the extent that investors may become more selective about the offerings they participate in, whereas when US indexes and tech stocks are booming, there's a tendency for investors to be less selective. But, the strength of the IPO market is demonstrated by the fact that the quality offerings hasn't diminished in any way,” Bloomberg quoted James Palmer, the head of equity capital markets for Europe, the Middle East and Africa at Bank of America Corp.

Richard Cormack, head of equity capital markets for Europe, the Middle East and Africa at Goldman Sachs Group Inc, told Bloomberg that as companies in sectors that have been hit by the pandemic start to recover, investors would want to buy into that recovery.

He also talks about the “broadening of the pipeline” in the second half of the year. "While the IPO market has mainly been driven by technology companies, we're starting to see a broadening of the pipeline in terms of sectors in the second half of the year."

Bankers are also optimistic that the SPAC craze will be exported overseas, even as only a handful of blank-check firms have listed in Europe and Asia so far.

Keen to cash in on the boom, exchanges like Nasdaq Nordic, London Stock Exchange Group Plc, Singapore Exchange and Hong Kong Exchanges & Clearing are re-writing their rules, at least looking into it, to ease the path to market for US-style cash shells.