Tags: Goldman | Stock | Deals | IPO

Goldman Tops in Stock Deals as IPO Pipeline Grows

Tuesday, 04 March 2014 07:35 PM

The months of hype, scrutiny and anticipation surrounding Twitter’s initial public offering came down to one Tweet: “Phew!”

Goldman Sachs’s Anthony Noto, the lead banker on the deal, broadcast his message on Nov. 7 at 10:53 a.m., just after the stock soared more than 70 percent in its first minutes of trading.

Twitter’s rise did more than calm Noto and the microblogging service’s followers. The deal, coming amid record highs for U.S. stocks and a surging IPO market, helped Goldman Sachs secure first place in the annual Bloomberg Markets ranking of equity underwriters, the magazine will report in its April issue.

The bank earned an estimated $1.72 billion in fees in 2013 — a year in which companies raised $56 billion through IPOs in the U.S., the most since 2007, data compiled by Bloomberg show. That’s a jump from the $41 billion in stock issued via IPOs in 2012, when Facebook Inc.’s disappointing debut weighed on the market.

“We’re seeing high-quality companies going public that are appropriately valued,” says Stephen Pierce, global head of equity capital markets at Goldman Sachs. “Investors are looking for performance, and IPOs are one way to capture that performance. That characterizes 2013 — and should continue in 2014.”

More IPOs

There were already more IPOs in the works this year than at the same time in 2013, according to a January report from Goldman Sachs’s investment banking division. Globally, 85 potential deals may raise $25 billion, the research shows.

Twitter unleashed a wave of technology IPO hopefuls: In the wake of its debut, 42 Internet and other tech-related companies had announced, through mid-February, sales that could bring them more than $2 billion, according to Bloomberg data.

Goldman is lead manager of the offering by Coupons.com Inc. The digital coupon site filed on Feb. 25 to raise as much as $140 million for a market value of more than $1 billion.

Morgan Stanley, No. 2 in the Bloomberg equities ranking, will manage the IPO of Sabre Corp., known for its Travelocity service. Morgan Stanley, owner of the world’s largest brokerage, generated an estimated $1.59 billion in fees last year, falling out of the No. 1 spot. Bank of America Merrill Lynch, JPMorgan Chase and UBS round out the top five in the equities ranking.

Stock Bonanza

Last year’s jump in U.S. stock markets opened the window for IPOs. The Federal Reserve’s efforts to keep borrowing costs low helped send the benchmark Standard & Poor’s 500 Index up 30 percent, the most since 1997.

Plains GP Holdings LP, formed to pay dividends on behalf of an oil-and-gas partnership, raised about $3 billion in its October debut. Hilton Worldwide Holdings, the world’s biggest hotel operator, took in $2.7 billion from its December sale.

Investors cooled on stocks at the beginning of this year, after the Fed pulled back on its bond buying in December. On March 4, Twitter closed at $54.28, more than double its $26 IPO price but down from its high of $73.31 on Dec. 26. Investors shifted out of U.S. stock funds and emerging-markets equities as the currencies of Turkey, Indonesia and other developing countries plunged.

‘Missing Out’

With less momentum in stock markets, IPOs will be harder to complete in 2014, says Jeff Sica, president of Sica Wealth Management LLC.

“Any investment bank that doesn’t get their IPOs out in the first quarter -- unless there’s some miracle that turns around the stock market quickly -- they’re going to be missing out,” says Sica, whose Morristown, New Jersey–based wealth- management firm oversees $1 billion in assets.

Most bankers are more optimistic that equity markets will improve. Dan Simkowitz, co-head of global capital markets at Morgan Stanley, predicts companies will issue stock worldwide as still-low short-term interest rates in the U.S., Europe and Japan help economies pick up.

“There’s a relatively synchronous economic recovery,” Simkowitz says of the global picture. “We haven’t seen that kind of growth happening as broad-based for some time.”

Alibaba Deal?

One of the most-anticipated potential IPOs of 2014 is Alibaba Group Holding, China’s online marketplace. The company, which sells everything from lobsters to Louis Vuitton bags, may have a market value of $153 billion, according to the average estimate of analysts surveyed by Bloomberg. The company took its Alibaba.com unit private in 2012.

Now the parent may approach the public markets, though it hasn’t disclosed a detailed timeline or location of a listing. The biggest global investment banks have spent years lobbying to be part of this deal.

Spinoffs and partial spinoffs may also contribute to more new stock sales. General Electric Co. is planning a U.S. IPO for its unit that provides store credit cards for retailers. Royal Bank of Scotland Group Plc has been preparing for an IPO of its U.S. subsidiary, RBS Citizens Financial Group Inc., the 24th- largest U.S. bank holding company.

Such deals promise to make 2014 another good year for equities underwriters, if markets hold up, says Liz Myers, global head of equity capital markets at JPMorgan.

“While we experienced some volatility in the emerging- markets arena early in the year, the potential salve is the continuing positive trajectory of the U.S. economy,” says Myers, who helped her firm bring in an estimated $1.41 billion from equity-underwriting fees last year.

“Assuming that trajectory continues, companies will perform well, and stock prices will follow.”

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Twitter's IPO helped Goldman Sachs secure first place in the annual Bloomberg Markets ranking of equity underwriters, the magazine will report in its April issue.
Tuesday, 04 March 2014 07:35 PM
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