From Deutsche Bank Research, June 9:
Chart of the Day
One of the most common questions we are hearing from clients right now is whether the mega wave of equity issuance hitting the US market could trigger a broader sell-off. With headlines dominated by blockbuster IPOs and issuance volumes accelerating, it is a natural concern — but history suggests the fear may be misplaced.
Our equity strategists Binky Chadha and Parag Thatte have looked closely at prior issuance cycles (see here), combining academic literature with empirical evidence from past waves. The conclusion is clear: equity issuance waves typically coincide with strong equity market returns, not market stress. The reason is that companies tend to issue when equity demand is strong, earnings momentum is healthy and investor risk appetite is elevated. In other words, causality usually runs from strong markets to issuance, rather than issuance causing markets to fall. This is very similar to my experiences in my former life as a credit strategist.
So how large is the current IPO wave? As our strategists note, US equity issuance has been rising steadily since early 2023, climbing from a quarterly run-rate low of around $30bn to roughly $120bn today. The coming months should mark a meaningful step-up, with a flurry of high-profile mega-IPOs expected to raise tens of billions of dollars each. Put into perspective, however, even the very largest expected IPOs amount to just over 0.1% of the S&P 500’s market capitalisation. See their piece for some great graphs....
.... MUCH MORE
Also at Deutsche Bank June 9: "Geopolitics beyond Iran"
If interested see also:
Ummm, yes.*
October 2008 - IPOs Produce Smallest Gains Since 1995 as Offerings Increase
Supply and demand. The one effect I can guarantee is the sopping up of billions of dollars and yuan* that would otherwise go into currently trading issues. IPO exits are not only a sign of a top but actually help bring them on by removing some liquidity....
December 2018 - "Nasdaq, 'Tech,' & IPOs are in for Gut-Wrencher"
The Fed's interest rate moves are not that big a deal.
I know that runs counter to a lot of commentary but the upticks are not a problem. Yet.
The bigger headwind facing the market is the Fed's balance sheet unwind sucking up liquidity.
And next year's planned mega-IPOs threatening to do the same....
September 2025 - "US IPO Activity On Track For Best Quarter Since Q1 2022"
This is what we were referring to introducing August 6's "Blackstone prepares portfolio companies for IPOs":
One of the reasons markets trend higher is a lack of new shares coming on to the market.
Over the last few months the IPO window has been opening and the offerings absorb buying power that would otherwise go into issues already trading.
See also: supply/demand.
The Wall Street marketeers are nothing if not opportunistic.
And depending on how much stuff they are primping, packaging, and pushing, this is why stock offerings tend to mark the short/intermediate-term tops in markets.
Just something to be aware of, not a hard and fast rule.
June 1 - Who Will Buy These Giant IPOs After They Begin Trading? You Will (SpaceX; OpenAI; Anthropic et al.)
