IPOs boom, change as pandemic speeds deals

Equity issues are surging to a record high and projected to stay strong for the rest of 2020, even as the pandemic upends traditional inperson marketing junkets.

The process of initial public offerings — not just how deals are getting done, but also how they’re structured — has adapted in ways that will change capital markets for years to come.

Instead of companies shuttling between cities and sometimes continents to meet investors, roadshows have gone virtual and are now often shortened to four to five days from seven to eight. Meanwhile, more informal test-the-waters meetings have lengthened, and prospective investors are indicating interest earlier.

“Investors are realizing the IPO roadshows are becoming more condensed from a time standpoint, which puts more importance on the testing-thewaters interactions with investors in advance of the IPO launch,” said Ryan Parrish, head of Bank of America’s Americas equity capital markets syndicate.

While these meetings are similar to a formal roadshow, no official orders for shares are taken. The U.S. Securities and Exchange Commission amended rules last year to allow all companies to have these meetings, which were previously only available to emerging growth companies.

Their purpose can also be to find potential cornerstone or anchor investors to secure commitments before formal book building begins. That can smooth the first few months of trading, allocating more stock to large investors who are less likely to sell right away.

Most listings now attract significant indications of interest from investors before the deal launch, said Will Connolly, head of technology ECM at Goldman Sachs Group. That wasn’t common before the pandemic.