Wall Street banks post record $10 billion in IPO revenues even as average investors in 2021 face worst returns in years

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Best of times and worst: This was the story of two IPO markets on Wall Street this year.

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Investment banks booked a record tally in revenue from initial public offerings in 2021, despite the performance of IPOs, which by one measure was the worst in at least three years for average investors.

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Goldman Sachs Group Inc. Underwriters, including GS
JPMorgan Chase JPM,
and Morgan Stanley MS,
Combined to record IPO revenue of about $9.8 billion, including special purpose acquisition companies, or SPACs, according to data compiled by Dealogic for Businesshala. The total revenue of IPOs is $4.995 billion in 2020, compared with $2.1 billion in 2019 and $1.95 billion in 2018.

Even barring the revenue generated from SPAC, which has been one of the most popular ways for investors to take companies public over the past year or so, bankers collected a record fee amount. More traditional listings on public exchanges saw banks post nearly $5.531 billion in revenue so far this year, with no other year coming close, including the dot-com era, when total IPO fee revenue for 1999 and 2000 There was a combined $6 billion. Using data up to 1995.

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Goldman booked the highest total in IPO fees, including SPACS, with approximately $1.456 billion in 2021, doubling the tally in 2020 to $758 million. In fact, three banks made more than $1 billion in fees, with JPMorgan booking $1.1 billion and Morgan Stanley seeing $1.025 billion in revenue in 2021, representing the other top two banks, Which has been a bumper year for underwriters to newly public companies.

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However, record revenue comes from investment banks as the performance of IPOs has lagged far behind the broader market. renaissance ipo etf ipo,
An exchange-traded fund that tracks the performance of new offerings was down 11.3% on the year as of Wednesday, which would represent its worst annual performance since 2018, when the ETF declined nearly 18%. .

On top of that, the broader market easily beat your average IPO returns with the Dow Jones Industrial Average (DJIA),
Looking at year-over-year gains of over 19%, the S&P 500 Index SPX,
About 28% so far in 2021 and the technology-laden Nasdaq Composite Index comp,
Despite several hiccups, investing in the COVID-ridden period is staring at a 22% return so far in the year.

John E. Fitzgibbon, Jr., founder and editor of iPoscope, an IPO data and ratings service in Rahway, NJ, said the new issuances received great support on the first day of trading, but failed to sustain long-term interest.

Referring to the trading activity in the first session of the IPO, he said, “After the hot money run, there was no aftermarket performance.”

“You will see a huge amount of trading volume on the first day, and about half on the second day, and after that, you will see about half the volume on the third day,” Fitzgibbon said.

Businesshala’s Emily Barry reports that 2021 marked the strongest year for IPO listings and volume in history, surpassing 1,000 offerings for the first time, according to Delogic Data, which raised a record $315 billion — when the total Including $200 billion had never been hit before. one year.

Barry noted that more than half of those deals were SPACs, as 606 blank-check companies went public in 2021, most of which were heavily vetted at the beginning of the year — 298 of the SPACs that went public. , were in the first quarter of 2021. ,

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Some notable companies that made their 2021 debut to much fanfare, only to stumble, Robinhood Markets Inc. hood,
Poshmark Inc. posh,
Bumble Inc. bbml,
and Coinbase Global Inc. coin,
Which became public through direct listing. Los Angeles-based Honest Company HNST,
The company, which sells environmentally clean baby and personal care products, had its IPO priced at $16 in May but was trading at nearly half that on Wednesday.

In fact, two-thirds of companies that went public in 2021 are underwater relative to their IPO prices, The Wall Street Journal reported on Wednesday,

Wells Fargo banking analyst Mike Mayo said this year highlights a renewed bull market for Wall Street.

“The record year for IPOs reflects a period of bull-market banking,” he told Businesshala.

However, he added that there is little chance of this trend continuing into 2022.

“I haven’t spoken to a single banker or investor who expects the momentum of this activity to continue, but it could stay above 2019 levels for longer than people think,” he said.

Executives at Goldman, Morgan Stanley and JPMorgan either declined to comment or did not immediately return requests for comment.


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