IPO bankers face headwinds from Silicon Valley to Saudi Arabia as capital markets fees shrink
- Fees from equity capital markets deals are set to fall 15 per cent in 2019, according to Coalition; could get worse as some targets consider private markets
- Saudi Aramco, Alibaba Group are among bright spots in global IPO markers while WeWork disappoints
From Silicon Valley to Saudi Arabia, it’s been a tough year for IPO bankers.
Wall Street kicked off the year excited about money it would make bringing to market some of the world’s most iconic companies. A crop of start-up unicorns from Uber Technologies to WeWork were preparing to sell shares. Then the world’s most profitable company, Saudi Aramco, started gearing up for its own initial public offering.
These deals have become emblematic of how things can go wrong. Uber’s shares have tumbled and WeWork scrapped its offering, causing other tech giants to reconsider their listing plans. Most of Aramco’s arrangers made almost no profit even after it became the world’s biggest-ever IPO.
The top global banks’ fees from equity capital markets transactions are set to fall as much as 15 per cent this year, according to research firm Coalition. The trend could worsen in 2020 as more companies like Airbnb shun the traditional IPO process to pursue listings with less involvement from Wall Street.
“This year has been a challenging one for ECM,” said James Roe, a partner at London-based law firm Allen & Overy. “There are global headwinds beyond Brexit, global trade wars, China’s economic growth, the current situation in Hong Kong, and economic conditions in Europe, all of which have had an impact on IPO activity.”
Companies raised US$229 billion from IPOs globally this year, a 1.4 per cent drop from 2018, according to Bloomberg data. Fundraising in the US increased 7.7 per cent to US$69.6 billion, though performance has been weak.