March kicked off with a flurry of deals as participants saw a good opportunity to sell stock via secondary offerings. Momentum came to an abrupt halt in the second week as Silicon Valley Bank's inability to raise additional equity caused a regional banking crisis that led to significant deposit outflows, increased volatility, and government intervention. Though volumes this month came in 17% above the LTM average, Q1 issuance was still 5% lower than Q1 2022.

 

Follow-on share sales continued to drive nearly all ECM volume this month with 48 deals totaling $9.9bn, exceeding the LTM monthly average of $8.1bn. The average discount on deals >$50m shrunk to 3.9% and average first day return was 1.2% (vs LTM monthly averages of 7% and 2.6% respectively). This is the smallest average discount we have seen since mid-2021. The largest deal across sectors was a $1.3bn marketed follow-on offering of AerCap Holdings (AER) from GE that priced at a 2.5% discount on 3/8 and traded down 2.0% on the first day. Technology, Industrials, Healthcare, and Consumer Defensive each accounted for over $1bn.

 

Atlas Energy Solutions (AESI), an oil and gas services provider, was the only traditional IPO this month, raising $324m of primary proceeds and pricing shares at $18, below the initial $20-$23 range. Shares traded down 5.8% on the first day and were down 5.6% as of March 31st.

 

In private capital markets, Stripe raised $6.5bn at a $50bn valuation in a Series I funding round. The new funds will provide liquidity to current and former employees as the company navigates a challenging startup environment. Also, Reuters reported that Arm Ltd., a Softbank-owned company, may raise at least $8bn in a highly anticipated US IPO in 2023, targeting a valuation of over $50bn.

 

March reminded us that things can change quickly, and a silver lining of the regional bank crisis has been the notion that interest rates may peak sooner than initially expected. Treasury yields fell sharply this month, and though the inverted yield curve tends to precede a recession, the S&P (+3% in March, +6% YTD) and the tech-heavy Nasdaq (+7% in March, +15% YTD) remained strong. If the markets remain stable, we expect a modest increase in ECM activity before earnings season begins.