What's going on?
Your commute might’ve become shorter, but initial public offerings (IPOs) are certainly on the move: three new companies hit the stock market on Friday, and there’s plenty more still to come.
What does this mean?
Last week’s debutants included such household names as German defense supplier Hensoldt, British restaurant chain Various Eateries, and $61 billion hydropower utilities firm China Yangtze Power. For Hensoldt, the IPO was a chance for its private equity investors to lock in their profits, while Various Eateries plans to use the money it raised to expand its brands – never mind the pressure the hospitality industry’s under. As for China Yangtze Power, it notably listed its shares using the “Shanghai-London Stock Connect” program, which lets firms listed in the UK and mainland China raise funds through the other’s stock markets.
Why should I care?
For markets: Too much of a good thing.
High demand for stocks – like there’s been for most of this year – bodes well for new listings since it suggests investors will be keen to snap up new shares. But if demand doesn’t keep increasing in line with supply, there’ll be less cash available to boost the price of an individual stock on average (all else equal). And supply is going to keep increasing: food delivery firm Deliveroo’s reportedly eyeing a 2021 IPO, Ant Financial’s record-breaker is right around the corner, and analytics firm Palantir – which is likely to be worth $22 billion when it “goes public” – hits the stock market on Wednesday.
For you personally: Snowflake capitalists.
After a bumper IPO from Warren Buffett-backed tech firm Snowflake this month, you’d be forgiven for getting excited about the potential money to be made from a new company. But remember: most of the benefit of a new stock’s initial boost goes to early shareholders who bought into private and even cheaper shares. Even if you’re on the ball, then, your gains could end up looking pretty paltry…