Will the IPO bonanza last?

FOR OVER a decade many people in finance have worried about the decline of the public company. Big firms were shrinking their capital bases by buying back shares. And fast-growing firms, including several hundred tech “unicorns”—startups worth over $1bn—chose to remain in private hands rather than bother with an initial public offering (IPO). The result was riskier corporate balance-sheets and the exclusion of ordinary investors from the ownership of the economy’s most exciting firms.

This year has seen a reversal of this trend with an equity-raising bonanza (see article). In the past few days Tesla has said it will sell $5bn of new shares, while DoorDash, a food-delivery company, raised $3.4bn in an IPO. In Hong Kong shares of JD Health, a digital-medicine star, rose by over 50% on their first day of trading after its $3.5bn IPO. As we went to press Airbnb, one of the largest unicorns, was listing at a valuation of over $40bn. Worldwide, some $800bn of equity has been raised in 2020 by non-financial firms, the highest sum on record. In America in the last quarter the proceeds should roughly match the amount of shares that companies have bought back.