For Traders, IPOs and Secondaries Provide Opportunities
Where have all the IPOs gone?
Perhaps they are sharing shelf space with all the stock buybacks that aren’t going on. Maybe not.
With the widespread economic shutdowns that countries around the world have been forced to enact to help slow the spread of COVID-19, companies across myriad industries have seen revenues dry up almost overnight. Governments have begun providing direct aid to small businesses as well as firms in the most impacted sectors, but analysts expect many public companies will be forced to turn to the secondary markets to raise funds, likely presenting traders who trade new issuances a tremendous opportunity over the coming months.
“Companies from hard-hit industries such as travel, retail, restaurants and energy firms are looking to raise fresh capital, and much of that will come through secondary and convertible offerings,” said John Eade, President of Argus Research. Recent secondaries and convertibles include the $500 million secondary raised by cruise line Carnival, Darden Restaurants’ (the holding company for brands such as Olive Garden and The Capital Grille) $400 million secondary, United Airlines $1 billion secondary and the $350 million convertible offering by natural gas behemoth EQT’s.
Eade, who earlier this month co-authored the quarterly syndicate market summary and outlook, published with agency-broker dealer Triad Securities Corp., stated that the IPO market also has some bright spots, with biotech and pharmaceutical firms expected to lead the way. He added that the IPO pipeline is robust, with about 100 companies having filed plans with the SEC to go public.
For the traders looking to capitalize on these opportunities, the ability to get high-quality calendar knowledge as well as independent color is imperative, according to Triad Securities Chairman Kevin Schultz, whose firm has long been seen as a go-to source on deal flow.
“There’s often a very small window between when the secondary offering is filed and when it prices, so unless you’re on EDGAR all day clicking refresh it’s very easy to miss,” explains Schultz. “This is even more difficult if the filing is made after hours, which is often the case.”
Ronnie Saliba, Managing Partner at Ronin Global Partners and current subscriber to Triad’s New Issue Service, agreed.
“Getting timely and reliable intel on new issues seems like it shouldn’t be that difficult, but it’s surprisingly tough to get it all in one place.”
How the data is delivered is also important, added Saliba, who uses Triad’s mobile app. Given that nearly all traders are now working from home and therefore likely working with less screen real estate than in the office, practical issues like notifications not being as apparent can present challenges.
“Getting this info on my phone is useful, not only because I’m more apt to see it that way, but also because so much of the most important information comes out after I’ve logged off for the day.”
Anywhere, anytime access to facts on new issues is crucial, says Triad’s Schultz, especially if the work from home situation stretches into months or another flare up of COVID later this year forces a second wave of quarantining.
“We launched the Triad New Issue Service Mobile App last year assuming it would be a nice value-add for our clients, but with the situation we’re now in it has proven to be hugely popular,” said Schultz. “With real time alerts and updates, from the initial filing to the minute an IPO or secondary or convertible offering is priced, it’s become a critical part of the workflow for a lot of folks who are trading these offerings.”
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