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In Mizuho | Greenhill’s Beyond The Obvious podcast channel, we uncover the value that others miss.
Our podcast is a source for the latest discussions on topics related to capital markets, dealmaking activity, business leadership and more.
Delve into insights from our investment & corporate banking thought leaders to hear their unique perspectives on current trends and market influences.
Learn how industry icons and influential figures began their journeys, overcame adversity and rose to success.
Discover insights that look deeper.
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Thanks for joining me today.
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Obviously, a big week in the capital
markets and the equities world in general.
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Wanted to chat with you
and get your thoughts on now
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that we're post the election.
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You have a change in administration.
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How do you think
investors are reacting to this.
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You know, initially.
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And how do you see things playing out
over the next couple of quarters
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as we move, toward the end of the year
and into the new year?
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Our initial conversations with investors post
the new administration turning over,
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I think investors are generally
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optimistic, given we're sort of behind
a large overhang on the market.
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Now that we're past that,
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I think investors can move forward
with a little bit of clarity in terms of,
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policies and procedures
that may come into play
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to impact single name equities
as well as the market broadly.
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That could relate from anything
to, taxes in particular to
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single name stocks as well
that could impact certain sectors
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like we saw shortly
after the announcement,
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financials and industrials
and tech and energy stocks all sort of
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performed well, over the last
couple of days after the election, and
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now that we have
the overhang of the election itself
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behind us, we have more sort of guidance
in terms of how we'll move forward.
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So Shaival, when you think about the IPO
market in 2025, how do you see things
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playing out with investors
as we flip to a new administration
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and people are getting comfortable
with a different market?
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What do you think about that environment
for deals coming into next year?
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Investors that we speak
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to have been doing ‘testing the water
meetings’ sort of throughout the year.
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But to your point, the IPO
market has been generally fairly light.
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People are fairly optimistic
that 2025 will be, one, a catch up year,
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but also just new issuance
coming to fruition
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that people didn't expect to come.
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And I also think that sort of ties into the,
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market for strategic alternatives broadly,
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which seems sort of ripe, given
the change in administration.
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People are optimistic
in terms of getting deals
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done in a fairly,
less regulated environment.
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And I think people are also optimistic
that certain sectors will benefit
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versus others.
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And, they'll be able
to capture some of that, upside.
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What's interesting, and I think
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what we're going to see in 2025,
which we've been missing for the past
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couple of years is really the small cap
transactions, right.
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IPO's in that 150-to-300, $400 million range.
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The move of the Russell 2000
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over the last couple of days
post the election, in my view,
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is really indicative of investors
being willing to step out a little further
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on the risk spectrum
and not just go for the big
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well known transactions,
but really broaden their footprint
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in terms of where they're putting capital to work.
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Are you hearing that from investors
that that's something
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they're interested in doing,
going forward into 2025?
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Yeah, I think in our conversation
with investors, people are more
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open to broadly looking at areas of growth
and great companies, right.
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The last several years we've sort of seen,
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investors sort of gravitate into certain names
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that are more defensible
and more tried and tested.
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And I think now folks will be more inclined to
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look at companies that they may not have
historically looked at.
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And, I think that bodes
well for the IPO market
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for the Russell as well as potentially
the M&A environment as well.
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When you look at some of
the smaller cap companies
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where stocks have sort of been propped up
and trading at all time highs,
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a lot of times
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you have management teams that are looking
for strategic alternatives
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for those particular companies.
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The appetite of which we have
more clarity post the election allows them
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to either take the approach of an IPO
or an M&A transaction.
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Yeah, I agree.
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And Shaival, one other topic that I want to
discuss is sponsor IPO activity.
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We've seen three recent
very successful transactions.
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And when you think about that,
that's a huge part of the IPO market.
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And we saw a ton of activity
in 2020 and 2021.
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But really we've been missing that
for the last couple of years.
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So when you think about those three
successful transactions
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that just happened.
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How does that present itself
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as an opportunity for sponsors
relative to doing
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a continuation vehicle
or a strategic sale of an asset?
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How does that, that IPO window
open up for sponsors in 2025?
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The alternatives for a sponsor
deal, are definitely more,
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beneficial now that we have more clarity
moving forward.
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And I think, when we think
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about involvement from sponsors,
their appetite has always been there.
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It's just been— There just wasn't much guidance
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in terms of what would be in the future.
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And I think now that we sort of have that
we should see more appetite from sponsors
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to be more active participants.
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And also,
for that market to ease up a bit.
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Yeah. Look, I think the volatility coming in
a little bit and
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investors and sponsors
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both getting more realistic
about valuations should help drive,
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more liquidity in that market.
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And that's certainly what we're seeing
right now between the recent transactions.
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Also some of the secondary sell-downs
that we've seen.
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But hopefully that's an area
that we see come back strong in 2025
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because it is a key part of the market.
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Yeah I also think that if the corporate
tax rate does come down,
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it'll make the appetite
for some of these deals
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to be a little bit stronger,
simply because companies
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will be flush with more capital
that they could do more with.
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Potentially pursue strategic alternatives
and do deals with sponsors.
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Let's pivot to rates for a second and,
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one of the things
that I was really surprised by was
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how much the market indices went up
the same day that rates gapped out.
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And usually you don't
have those two things go hand in hand.
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Where do you think that will have
an impact in terms of equity
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investors and their appetite to put capital to work?
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Shortly after the ten year sort
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of spike to almost 4.5%,
and that was pretty interesting.
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It all sort of ties
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in to the appetite of issuers
potentially wanting to do more.
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And sort of when we think
about a rising rate environment,
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when we think about the convert market
in particular, right.
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Bond issuance, I think that market is sort of ripe
for significant deal activity.
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I think in a bad year
in the convert market,
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we have about, I don't know,
$20-to-$40 billion of issuance and,
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next year’s sort of setting
up to be pretty robust
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in terms of, call it the $50-to-$75 billion range.
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And the Fed has sort of told us more
or less what they're going to do.
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And given we sort of have that behind
us, irrespective of the election,
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you know, it sort of
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sets up well for at least
knowing the trajectory of rates into ‘25.
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Yeah, I couldn't agree more.
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We're seeing just a ton of pick up
right now on the convertible side.
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I think you've got investment
grade issuers who now had thought
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that their funding capabilities going into
2025 were going to be a lot easier with
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rates coming down.
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But now that rates are back up again,
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all of a sudden
we're seeing a lot of IG names
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who are really interested
in the convertible product,
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who had kind of pivoted away from it,
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over the last 4-to-6 weeks.
Then all of a sudden
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we just see a ton of inbounds
and demand from issuers
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thinking about where convertible rates
are relative to straight debt.
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And then the other thing that I think
you're going to see next year,
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which supports what you're saying
about the $50-to-$75 billion, is the fact
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that you have
this massive wave of issuance
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that happened during Covid in 2020
and 2021 that needs to get refinanced
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and a lot of those deals, because
of the exuberance of the equity market
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at that time, are way out of the money,
and you're going to have issuers
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look to do new transactions
to repay those, as they come due.
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But anyway, I do think it's
going to be a really robust year next year
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in the equity capital markets,
both on the straight cash side,
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you know, IPOs and follow-ons and converts
and look really appreciate
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you taking the time today to
to give us your thoughts.
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Hopefully we'll have a very busy 2025. So
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I appreciate everyone listening.
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And if you have any questions
about your capital markets needs please
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reach out to your Mizuho professional.
Thank you.