Companies raise more than $12,000,000,000,000 in ‘blockbuster’ year for global capital markets

Companies raised a record $12.1 billion in 2021 by selling stocks, issuing debt and taking out new loans, as a torrent of central bank stimulus and the rapid recovery from the pandemic have propelled many global markets higher.

With just a few days left in the year, cash-in-transit is already up almost 17% compared to 2020, which was itself a historic year, and almost a quarter above the take in 2019 before the coronavirus crisis, according to Financial Times calculations based on Refinitiv data.

The fierce pace of fundraising underscores how easy the financial conditions are in many parts of the world, including the United States, where over $ 5 billion has been raised.

“It’s been a really exceptional year,” said Chris Blum, a BNP Paribas banker who helps fund leveraged buyouts. “We expect this to continue into next year. Every year you kinda think the markets are going to slow down from this blistering pace, but they’re still going to be robust.

Gargantuan sums were raised when companies such as electric vehicle maker Rivian and South Korean e-commerce firm Coupang went public.

Dozens of 10- and 11-figure loans have been signed, including some to finance Discovery’s merger with AT&T’s WarnerMedia unit and freight rail operator Canadian Pacific’s takeover of rival Kansas City Southern. And investors in the approximately $10,000,000,000,000,000,000 US corporate bond market swallowed trade after trade.

Massive bond-buying programs launched by central banks, including the Federal Reserve and the European Central Bank, at the height of the pandemic, helped drive borrowing costs down to historic lows. Coupled with the huge amounts of cash flowing through the financial system, the environment was extremely business-friendly to attract new investors and lenders, bankers said.

As sales of high-quality corporate bonds slowed in Europe and the United States – many blue-chip groups had bailed out their corporate coffers in 2020 – a surge in junk-rated corporate issues has caused drop total corporate bond sales by less than 3% to $5.5 tn.

This has been partly bolstered by huge private equity activity, as buyout stores such as KKR, Blackstone and Apollo have borrowed in the credit markets to fund buyouts that have totaled around $1.1 billion this year. .

The year in the debt and loan markets

$10 billion

The US corporate bond market in 2021 reached this size for the first time

11

Number of corporate bond sales over $ 10 billion this year

$41.5 billion

Lending banks wrote to fund WarnerMedia’s merger with Discovery

Sales of junk bonds soared 17% from a year earlier to just under $650 billion, while new issues of leveraged loans – loans to highly indebted borrowers – surged. more than doubled to $614 billion, according to Refinitiv and S&P Global’s Leveraged Commentary & Data service.

“Whether you think valuations are high or not, the reality is there’s a lot of cash in the system and the animal spirits in the M&A market are very much alive,” CEO Kevin Foley said. of JPMorgan Chase responsible for underwriting more corporate bond transactions than any other in the world, according to Bloomberg rankings.

Global equity issuance smashed the 2020 record, driven by increased initial public offering volumes in all major markets. Total equity issuance reached $1.44 billion, up 24% year-on-year.

Line graph of fees collected by global investment banks by asset class (in billions of dollars) showing that Wall Street has benefited greatly from the windfall of capital raising

In the United States in particular, IPO volumes almost doubled from what had already been a bumper 2020, with the debut of companies such as chipmaker GlobalFoundries, dating app Bumble and Nubank, the Brazilian fintech group that counts Warren Buffett and Tencent as investors. .

“We didn’t just break the record, we broke the record,” said Jim Cooney, head of equity capital markets for the Americas at Bank of America. “It wasn’t even close.”

Despite strong volumes and solid growth in the broader stock market, many newly listed companies performed unusually poorly after listing. The Renaissance IPO index, which tracks the performance of recent U.S. listings, has fallen 8% this year, its worst performance against the S&P 500 since its launch in 2009.

The Year in Equity Markets

$ 1.4 billion

The record sum raised thanks to the sale of shares

$13.7 billion

How much Rivian raised in the biggest IPO of 2021

$162 billion

Total cash raised by Spacs worldwide

For the first time ever, more money was raised by special acquisition companies in the United States than through traditional IPOs. The issuance has slowed from a stellar first quarter, but a steady stream of blank check companies – who raise funds from investors and then look for a company to acquire – have entered the market in the last few months of the year. year, collectively raising more than $ 152 billion. This year.

Brad Miller, co-head of US equity markets at UBS, said the Spac market “has been nothing short of extraordinary.” The result, he added, was that there were now “a huge number of companies looking for M&A opportunities”.

More than 550 Spacs are currently searching for a target, according to Dealogic, and nearly 200 have a deadline to find one before the end of 2022. Their success or failure will determine whether the Spacs phenomenon persists or if they s are fading to become the niche product. they were before 2020.