With global markets continuing to extend their gains from the March lows, largely glossing over the bad news and focusing on the good, can it be long before the flood gates open for IPOs and secondary stock offerings? About half my career was spent as an equity research broker calling on professional money managers with what I believed were my employer’s best ideas. That portion of my career started in 1981 at L F Rothschild Unterberg Towbin. I was a rookie so in late ‘81 and early ‘82 I was calling on the people he didn’t wish to call in his account base. I began to get some of my own accounts in early ‘82 in places where Rothschild seldom called with any consistency. I was anxious to pull in commissions from these accounts that had seldom done business with the firm and the only way I could imagine that would happen was by making the research calls. I didn’t appreciate that I was flying into the teeth of a recession, but it frankly would have been like being a broker calling this past winter with buy recommendations for clients. Six months later and you look like a genius.
GDP Declines in seven largest recessions
Image Source: Christopher Dodds, Eleutherian, September 18, 2009
The bull market ensued later that summer and Rothschild became know as one of the original “four horsemen” of the technology investment banking world. The bulls ran, stocks began to get stretched in their valuations so the bankers said let’s give them new merchandise. The IPOs began coming as a few are today. So did secondaries for companies that had an interesting story about what the proceeds could do for their prospects. Eventually the quality of the IPOs and the stories behind the secondaries began to either become less compelling or they just reached to point of soaking up the last dollars out there to support the market.
To make a long story short, I saw this cycle repeat itself in the next twenty five years and one lesson that I think I learned is that the bull run isn’t over until Wall Street has its chance to make a pile of money peddling a whole lot more equity offerings than we have seen coming off the March lows and a recession that most now believe has passed its bottom.
This recovery will be different than many before it for lots of compelling reasons, but we are in a recovery and the equity and debt markets will become more a more substantial source of capital growth than they have been thus far. From Greenwich Technology Advisors’ perspective that means management and their boards should be open to mergers and acquisitions if they do something meaningful for the future prospects of the company because investors will likely have the appetite to invest in a well conceived plan.
