Companies have been racing to make their public debuts as stocks continue to hit new records, reflecting pent-up demand and a desire to move quickly in case the pandemic and US election send markets reeling again.
What’s happening: This has been the hottest August for public offerings listed in the United States on record, with 41 deals worth $16.4 billion, according to research firm Dealogic. That includes special purpose acquisition companies, or SPACs — so-called “blank check” funds that investors can tap to support future dealmaking.
“The IPO bankers skipped vacation,” William Smith, CEO of Renaissance Capital, said in a recent note to clients.
September is expected to be even busier, with a growing number of companies announcing highly-anticipated listings.
Ant Group, the financial affiliate of billionaire Jack Ma’s tech company Alibaba, this week filed for a concurrent listing in Hong Kong and on Shanghai’s Star Market, China’s Nasdaq-like tech board. The company could raise as much as $30 billion, according to Reuters.
That would make it the biggest public debut ever — just ahead of Saudi Aramco’s $29.4 billion raise late last year. Alibaba scored $25 billion when it went public on the New York Stock Exchange in 2014.
Palantir, the secretive Silicon Valley data analytics company cofounded by Peter Thiel, also filed paperwork this week indicating its intent to go public.
The company said that it has never turned a profit in 17 years, and that about a third of its revenue came from its three biggest customers, my CNN Business colleagues Sara Ashley O’Brien and Rachel Metz report.
Still, its ambitions are large. Palantir, which provides governments and corporations with tools that range from tracking the spread of the novel coronavirus to locating terrorists, stated in the filing that one of its goals is to “become the default operating system for data across the US government.”
And let’s not forget Airbnb, which filed confidential paperwork for an IPO just last week.
Shares of newly public companies have been performing well, according to the Renaissance IPO ETF, which tracks firms that have made recent debuts. The ETF is up 13.5% this quarter, while the S&P 500 has gained 11%.
Banning WeChat will hurt US companies
President Donald Trump’s threat to ban WeChat has already upset millions of users in America who use the app as a lifeline to family and friends in China. It could also become a big headache for US companies operating in the world’s second largest economy, my CNN Business colleague Sherisse Pham reports.
The executive order issued earlier this month would prohibit Americans and US firms from “any transaction that is related to WeChat” — a significant escalation of the tech war between Washington and Beijing.
The order clearly targets usage of the app stateside. But its broad wording also suggests that its effects “could go beyond the United States, and restrict all US entities whether they were in the United States or globally here in China,” said Ker Gibbs, president of the American Chamber of Commerce in Shanghai.
That would be a huge problem for US firms in China, where WeChat has become essential for hundreds of millions of people who use it to message friends, pay for goods, hail rides, book train tickets and order food. Companies use the platform to engage with customers, advertise and, most importantly, accept payments.
Starbucks and Walmart, for example, could be cut off from customers who use WeChat to order their products. Walmart said last year that 30% of transactions in China came from its “Scan and Go” app, a program embedded within WeChat.
Nike CEO Mark Parker said in December that the company was seeing “great momentum” with digital partners, such as “Instagram and Google and Tmall and WeChat.” The company uses the apps to build “relationships with the consumer,” Parker said.
According to Gibbs, whose business organization comprises of 3,000 members from 1,500 firms, losing the ability to use WeChat “could literally be an existential threat” for US companies hoping to build out their presence in the Chinese market.
Oil prices at five-month high as Hurricane Laura looms
Oil prices hit their highest level since March as the Gulf Coast braces for Hurricane Laura, which is expected to continue strengthening until it makes landfall in Texas and Louisiana Wednesday night or Thursday morning.
Brent crude futures, the global benchmark, were last trading at $43.71 a barrel, while West Texas Intermediate futures, the US benchmark, were at $43.16 per barrel.
Hurricane Laura, which could arrive as a Category 4 storm, has forced oil companies to evacuate rigs and suspend production. The US Bureau of Safety and Environmental Enforcement estimated Tuesday that roughly 84% of oil production in the region has been shut in, along with 61% of natural gas production.
Investor insight: Storms usually provide short-term disruptions to oil prices, Stephen Innes, chief global markets strategist at AxiCorp, noted to clients. Support for prices over the longer term will need to come from evidence of rising demand.
This could be a challenge in the months to come. IHS Markit said in a report this week that it expects global demand growth to wane, plateauing at 92 to 95 million barrels per day through the first quarter of 2021. That would be below where demand stood before the pandemic.
Dick’s Sporting Goods reports results before US markets open. Williams-Sonoma follows after the close.
Also today: US durable goods orders for July post at 8:30 a.m. ET.
Coming tomorrow: Federal Reserve Chair Jerome Powell kicks off a virtual Jackson Hole gathering of central bankers.