What's going on?

Global companies are going up in the world: data out this week showed that the amount of cash raised by initial public offerings (IPOs) hit a new high in the first half of the year.

What does this mean?

According to Bloomberg, IPOs raised a record $350 billion in the first half of this year, beating the previous six-month record of $282 billion in the second half of 2020. This year’s IPOs have been a very different breed too: think more renewable energy companies and online retailers than tech stocks and special-purpose acquisition companies (SPACs).

The boom is being fueled by the flood of cash central banks are pumping into the global economy, as well as by the rise of individual investors who are increasingly keen to buy into their favorite companies. And the party’s likely to keep going as long as the stock market keeps on rising – so much so that this year’s total proceeds are expected to top 2007’s full-year record of $420 billion.

Why should I care?

For markets: US banks are back in action.
The IPO boom is panning out well for investment banks, which generate dealmaking and advisory fees from every IPO they work on. Good news for their investors too: banks can use that windfall to reward shareholders in the form of dividends and share buybacks. And that finally includes US banks, which were restricted from doing just that during the pandemic. They passed the US Federal Reserve’s stress test last week, proving they can easily withstand a severe recession and give loyal shareholders the boost they deserve.

The bigger picture: Here today, gone tomorrow.
SPACs accounted for almost half the IPO proceeds raised in the first quarter, but their share has shrunk to just 13% this quarter (tweet this). Investor appetite is probably fading because of the increasing regulatory scrutiny on the space, not to mention their poor performance: a popular index tracking SPAC listings has dropped by almost a quarter from its February high.