In an article published in October 2020 by LexisNexis, our international capital markets team gives an overview of recent trends experienced by companies undertaking securities offerings in the international equity capital markets (ECM) and debt capital markets (DCM). This includes the rapid response to companies' urgent funding needs resulting from the impact of the coronavirus pandemic during the first half of 2020.

COVID-19 and the stock markets

In mid-March 2020, the coronavirus pandemic triggered a dizzying volatility spike and global stock markets plunged. However, by the end of June, the markets had largely recovered their poise, moving back towards normality while, in stark contrast, many real economies were in or heading towards recession.

Secondary offerings

According to data from financial markets platform Dealogic, global secondary equity issuance by the summer of 2020 was up 57 per cent compared to 2019 with issuance in the US up 80 per cent, Europe up 49 per cent and Asia (excluding Japan) up 15 per cent as markets looked to support the survival of companies left financially challenged by the impact of the pandemic.

For example, in the UK, there was an immediate and significant increase in secondary offerings, with over $21bn of follow-on issuance by over 50 issuers between 1 March 2020 and 30 June 2020 compared to $38bn for the whole of 2019.

Regulatory forbearance

Rapid, responsive, temporary regulatory forbearance was a theme globally, where regulators acted to facilitate swift access to larger equity capital raises, extend reporting and filing deadlines, and guide disclosure while reminding market participants that market-abuse/inside-information requirements must continue to be met.

Deal processes and execution

Existing capital markets trends, such as virtual deal processes and execution, have been accelerated by the pandemic. For example, London saw the first use of a platform enabling retail investor participation in an undocumented, non-pre-emptive equity placing by a premium-listed issuer. This development was well received and resulted in several other similar companies following suit.

Outlook for 2020 and beyond

Considerable fragility remains for the global capital markets. There is great uncertainty on many fronts, including what will happen as government stimulus tapers off and countries try to balance the easing of restrictions to protect economic activity with measures aimed at controlling further outbreaks to protect public health.

Another area of uncertainty is geopolitics. The US presidential election on 3 November 2020, the end of the Brexit transition period on 31 December 2020, and tension between the US and China will increase focus on structuring deals in a way that minimises execution risk.

Trends in 2019

The article also looks at 2019's key regulatory trends and notable transactions across the capital markets in Asia (excluding Japan), Europe, the US and globally.

Overall, the year saw fewer deals than 2018, the amount of capital raised globally in ECM transactions was at a similar level to that in 2018, while the amount raised in DCM transactions was close to the highest on record at $7.148trn globally, according to Dealogic.

2019 also saw the largest IPO privatisation to date, by state-owned oil giant, Saudi Aramco, raising $29.4bn in a solely domestic listing. (The Ant Group’s proposed Hong Kong- and Shanghai-listed IPO is expected to just exceed that, with an anticipated $30bn capital raise.)   

Examples of key regulatory trends include the continued rapid growth and development of sustainable finance, direct listings on the US stock exchanges and market participants adjusting to the new EU Prospectus Regulation as it entered fully into force. Another notable trend was the significant growth in US special purpose acquisition company (SPAC) IPOs, which has continued into 2020 despite the pandemic.

The leading global exchanges continued to look for a competitive edge. For example, Hong Kong reaped the rewards of its 2018 listing rule changes with a wave of secondary listings by Chinese issuers who had conducted their IPO elsewhere. The most notable of such 'homecoming' listings in 2019 was Alibaba’s $12.9bn capital raise, with other big homecoming listings, such as and NetEase, continuing into 2020.

Meanwhile, the London Stock Exchange's Sustainable Bond Market and the Shanghai STAR Board (Science and Technology Innovation Board), which aims to provide homegrown Chinese tech companies with a Nasdaq-style listing option, were launched in 2019. Exchanges also collaborated with successful transactions in 2019 on the China Europe International Exchange (CEINEX) in Frankfurt and the Shanghai-London Stock Connect programme.

Developments in disclosure during 2019 saw a continuing focus on risks relating to Brexit, cybersecurity, the transition away from LIBOR to risk-free rates and sustainability, particularly environmental risks, such as climate change.

Alternative Performance Measures or Non-GAAP Financial Measures remained a focus for regulators and, in early 2020, the US Securities and Exchange Commission issued guidance on key performance indicators and metrics (PDF).

For detail on these trends and much more, read the full article (PDF).