The past week was the busiest for US IPOs for the last 17 years, and it gave top Wall Street banks an opportunity to make a windfall. A drug manufacturer, a Turkish-based e-commerce platform, and a cybersecurity firm were part of the action. $100 million was raised by not less than 14 companies that went public via the Nasdaq and the NYSE exchanges. The last week turned out to be the most active for companies raising funds for the first time since 2004.
Fees earned by underwriters for helping in the offering process are estimated to be about $400 million. By the close of Friday, it’s estimated that the underwriters would have made $259 Million (paper gain) if only they decided to purchase the shares allotted to them at a discount.
The pace at which companies are going public indicates demand for growth. It also indicates that most companies would rather go for IPOs despite the increasing popularity of direct listings that do not require underwriters plus they have low advisory charges/ fees. It has been discovered that underwriting is one of the most lucrative businesses in Wall Street and it keeps becoming popular.
Beneficiary Wall Street Banks
The Wall Street Banks that were the beneficiaries in the busiest IPO week since 2004 were, for example, Goldman Sachs and Morgan Stanley. The banks raised $4.4B and made $88.7M in bank fees for the Didi Chuxing IPO. For SentinelOne, D-Market Electronics, LegalZoom, Krispy Kreme, and CLEAR IPOs, the banks raised $1.2B, $681M, $535, $409M, and $500 while they made $64.3M, $34M, $29.5M, $28.8M, $22.5 respectively as bank fees for each of the IPO.
Robinhood made a filing on Thursday for an upcoming IPO and market watchers think that it’s likely to be one of the largest for this year. Increased popularity and demand for digital assets and cryptos helped the company quadruple its sales for the first quarter to end up with $522M. However, the company made a loss of $1.4 billion which was attributed to an emergency fundraising linked to GameStop.
Due to its recent popularity, Robinhood is expected to command high valuation. The company plans to give retail traders an investment opportunity that has traditionally been for institutional investors. Robinhood is said to have reserved 35% of the IPO shares for its clients.
In an interview with CNBC on Friday, chairman of Interactive Brokers Thomas Peterffy was quoted saying that he thinks that Robinhood’s IPO is likely to be an all-time greatest meme stock. He added that meme stocks have no equity and no earnings currently but they’re growing fast, meaning they have a big potential. Additionally, Thomas noted that meme stocks seemed to be more appealing to people lately and that he’s expecting them to be a vehicle to draw more clients to the cryptocurrency market.