2020, a historic year for IPOs

IPOs have led the global financial activity in an otherwise forgettable year. There has not been such a high level of capital raising and such a high volume of initial public offerings since 2007.

A record year: more than 331 billion dollars have been raised, 42% more than in 2019, and 1,591 operations have been listed. These outstanding figures bring a little hope to the world economic outlook, greatly weakened by the difficult times we are experiencing. But, what have been the key factors behind this level of growth compared to last year?

Venture capital and SPACs, at the centre of global investment in 2020.

One of the main factors is the high level of venture capital investment, breaking records in the technology and health sectors. More than a quarter of the 1,591 IPOs were supported by this kind of investments, raising 96 billion dollars, 36% more than the previous year.

On the other hand, the special purpose acquisition companies (SPAC), the new trend to go public in the United States, have also played a major role, reaching close to 82,825 million dollars. The number of SPACs that have gone public has been 4 times higher than in 2019. If you still do not know this Wall Street trend, read our article on SPACs.

High liquidity in the markets in the last two quarters of the year.

A historic growth of this magnitude seemed impossible at the beginning of 2020. The graph below shows that both the volume and the capital raised were very low in the first two quarters, which were the toughest months of the pandemic.

After such a difficult start, IPO investment rebounded dramatically in the third quarter, with the number of listings increasing by 131% when compared to the previous quarter. Activity in the last quarter fell slightly, but it continues to be much higher than at the beginning of the year.

The IPO Report 2020 & Key Trends Set to Shape 2021 – Baker Mckenzie has been prepared with data from Refinitiv until December 3. Therefore, it is necessary to incorporate the data of the IPOs of the last weeks of the year.

The financial and technological sectors, leaders of the world IPO activity.

The volume of IPOs in the financial sector grew by 37% when compared to 2019, raising a total of 108 billion dollars in 360 operations. In second place, the technology sector raised 55 billion dollars worth of capital through 257 operations.

It was also a good year for the industry, with 193 listings, raising 129% more capital than the previous year. Finally, the health and consumer products sector also experienced a significant increase in raised capital, by 57% and 128%, respectively.

SPAC and ESG criteria will be at the forefront in 2021.

The trends in the primary market that we have seen in the last few quarters will continue, with the focus on private equity and SPAC. Moreover, companies should pay special attention to compliance with ESG (environmental, social and governance) criteria, since they have become a determining factor for investors. According to a recent study by EY (Ernst & Young):

  • 91% of the investors surveyed think these policies play a fundamental role in their decision-making.
  • 98% of investors evaluate non-financial performance based on corporate disclosures.
  • 72% of them examine non-financial reports in a structured and methodical way.

In conclusion, the outlook for the new year is optimistic, especially taking vaccination into account. It is expected that global economic activity will begin to improve and the growth of IPO activity will continue. The keys to primary market investment in 2021 will be:

  • Venture capital investment will play a fundamental role in the IPO process.
  • The number of SPACs will continue to grow, sponsoring a significant number of agreements.
  • The ESG actions of companies will be increasingly relevant, and socially responsible investment will have a greater impact on the markets.
  • The financial, technology and health sectors will lead global economic growth.