Busiest Week for New Public Offerings in Over 17 Years
From donuts to ride shares, last week’s IPOs resulted in the busiest week for new public offerings since 2004. Within a week’s time, 14 different companies raised over $100 million each. Investment banks like Goldman Sachs and Morgan Stanley collected sizable fees as the advisors for the week’s biggest IPOs:
- A Cybersecurity Startup SentinelOne, and
- A Ride-for-Hire Company Didi Chuxing.
These two offerings alone raised a total of $5.6 billion.
In third and fourth place were Turkish e-commerce platform D-Market Electronic Service & Trading and legal tech company LegalZoom. Krispy Kreme also brought in $500 million in the second IPO in the company’s history, partly by pricing their shares below the expected range.
How Much Did the Underwriters Make?
Underwriters like Morgan Stanley and JPMorgan Chase generated close to $400 million in fees for their role in managing these IPOs. These banks make a profit through advisory fees, which can range from 2%, in the case of tech giants like Didi, to 7% for smaller companies like CVRx and Aerovate Therapeutics. If these underwriters also exercise all of their stock options, they could see an additional profit of $259 million.
These gains come on the heels of the previous week’s major IPOs—health-tech company Doximity and cloud software vendor Confluent. Underwriters Morgan Stanley and JPMorgan received $74.7 million in fees and an additional $83 million in stock gains from Doximity (in an unusual move, Confluent did not offer an IPO option to the banks).
Though direct listings have become more popular in recent years due to lower fees, the frequency of new IPOs shows that these offerings are still most companies’ preferred pathway to the stock market.
How Should Investors React to this Trend?
As more companies opt to go public, investors often need to react quickly and be ready to assess each opportunity. In addition to keeping track of IPOs in the headlines, investors are wise to consider smaller businesses, which come with their own unique benefits.
One such benefit is the federal tax exemption for the sale of qualified small business stock (QSBS). Qualifying stock is not subject to capital gains tax on a federal level and in many states.
To learn more about investing in QSBS and to find businesses that may qualify, visit QSBSExpert.com.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.
