Good use was made of Equity Capital Markets in 2008 as companies, led by financial institutions, rushed to raise funds and secure their futures. As the global economy continued to falter in 2009, that need has only increased, with a broader spread of corporates desperately seeking funds to survive.
And most have.
It remains a source of wonder that despite the many companies on the brink, in sectors that look set for many months of struggle, equity investors have broadly supported them in their time of need.
Deeply-discounted capital increases have therefore dominated the flow globally, with many providing an opportunity for new money to come in at bargain prices - to the annoyance of some shareholders.
Among this flow only the US has provided any creativity in strategy. The demand by the US Fed that 10 TARP-recipient banks raise US$74.9bn to meet funding requirements, plus the need of others to raise funds to repay TARP, led to a massive call on equity investors.
The at-the-market approach to fundraising, where primary stock is gradually dribbled out during the course of a normal trading day, had only been subject to limited testing. The wave of impending equity meant it was adopted by several banks as they sought to use every sales approach to ensure success. The trials were not all successful, but the ability of PNC Financial Services to raise funds at a premium - and pay lower fees - suggests there is a future in this approach.
It was financials that drove equity-linked volumes in the US to US$54.5bn in the first half of 2008. Unsurprisingly that volume is down massively to just US$14.9bn. In Asia issuance has twindled to just US$2.1bn from seven deals as corporates focus on the profits to be made from buying back outstanding bonds at a discount.
Yet Europe has seen an uptick in sentiment and activity. Volumes for the first half of 2007, 2008 and 2009 all totalled approximately US$15bn. The number of deals has picked up marginally with over 20 seen in EMEA, but it is the changing dynamic that is so significant. The market only opened in the last week of Q1, but since then nearly every deal has attracted demand many times in excess of the bonds available. A new, broader investor base has emerged and if pricing allows it to remain, convertibles could move away from being the niche product they had become.
The desire of all ECM bankers is to see a return of their bread-and-butter - the IPO market. North America saw a handful of new names come to market across a mix of sectors, but it is China that looks set to dominate. The Largest IPO crown may have been taken by VisaNet in Brazil, but China has seen several deals and, more importantly, provided quick returns for investors that participated. The result of quick 20% gains on the early deals is a pipeline of several multi-billion US dollar offerings. If a US$20bn-plus IPO for Agricultural Bank of China can get done, then 2010 could be a bumper year.
