We began the month of September optimistic that US equity capital markets would see a broader reopening post Labor Day after seeing signs of life in August. A slight rebound in equities indeed fueled a surge in Follow-On activity in early September and set the stage for the first two sizeable US IPOs since May.

 

Corebridge Financial (CRBG) took its initial steps in separating from AIG (AIG), with AIG selling $1.68bn priced at $21/share. Third Harmonic raised $213m and traded up 15.8% day one, raising hopes that more biotech companies might look to access the public equity capital markets.

 

Unfortunately, that optimism was short lived. A host of macro headwinds led to a sharp sell-off in equity markets resulting in a slowdown of deal activity once again and a subdued outlook for the near term.

• Inflation data for the month of August came in above expectations leading the Federal Reserve to hike rates another 75bps and signaling that a higher rate environment for longer will be necessary

• Bellwether companies FedEx (FDX), General Electric (GE), Apple (AAPL) and Ford (F) all warned of deteriorating results as macroeconomic conditions worsened throughout the quarter

• Russia escalated the conflict in Ukraine with nuclear threats

 

With the market hovering at the YTD lows amidst heightened recession fears, there were some notable rumored changes to the ECM pipeline. Intel Corporation (INTC) lowered the valuation target for its IPO of Mobileye from $50bn to $30bn and said it could potentially put the deal off to 2023. Instacart said that they would likely focus its IPO on selling existing employee shares.

 

Follow-on activity for the month consisted of 51 companies selling $5.5bn worth of stock. This compares with $12.7bn in August and amounts to $73.7bn YTD. There was notable follow-on issuance in healthcare ($2.4bn), concentrated around biotech companies.