Global Sell-Off: Equity Syndicate Market Reaction

Global markets are in disarray as the VIX (volatility index) topped out at 65.73 as of Monday morning (premarket).

The reasons for this selloff, correction, recession (or however you would like to describe it) vary from the “Japan Carry-Trade” to the “Fed’s lack of forward thinking” or even just an overdue and overbought market. Whatever the reason…the reality is that markets are currently shook.

With so much blood in the markets, its “eerie” to think that the broad market is still markedly up for the calendar year (+8% YTD at market lows on Monday). One could ponder: How much pain are we truly in? 

The glass half-empty approach could indicate that there is a lot more hurt in this trade. The glass half-full approach embraces that this is a “blip” in the radar and the plumbing gets “fixed” with this leak.

In whichever camp you sit…the question we are examining is: What does this mean for equity capital markets? Think IPOs and Secondary’s.

The truth: August was already being chalked up as a dead month.

For weeks, the IPO market lacked new official filings or companies that have refreshed their paperwork with the SEC. Currently, the pipeline sits at a whopping five. And those five were highly unlikely to set terms until after the Labor Day holiday. August, in general, is a dead month for the IPO market due to seasonality. August has also been a traditional month where bankers “set the table” for the typically “ripe” IPO period of September and October.

So will this early August event effect September and October?  That and the effects of this current selloff are yet to playout. But when chaos ensues its oftentimes a good idea to listen to people on the inside. For example, the CEO of Jefferies, Rich Handler, who boldly stated that the IPO window is OPEN. See the tweet below.

https://x.com/HandlerRich/status/1818711019549495756

There is excellent commentary in the tweet and I encourage you to read it. Many must forget the bull run of 2021 because of the uniqueness of the scenario (heavy stimulus, low rates). Handler even references May 2023 as the beginning of the opening of the IPO window.  The IPO numbers in 2024 reflect this: 44 IPOs for $13.5b cash raised. Through seven months that is nearly the same amount of IPOs as 2022 and 2023 combined.

What’s next?

Keep an eye on the official filings from the SEC for true “cues” to the IPO market. Secondary public offerings will likely be non-existent in the current volatile environment. But we wouldn’t say the IPO market is done at this time.