The Owner Of Burger King And Others Sell Shares At A Rapid Rate In A Sign Of Upcoming IPOs

Bankers and investors are gaining confidence that the IPO drought is finally ending following a string of large stock sales by public companies.

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The data from Dealogic shows that more than 50 publicly traded companies in the U.S. raised approximately $7.4 billion for themselves or their shareholders in February, compared with 23 companies raising $1.8 billion in the same month last year.

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In order to raise cash through stock sales, companies such as American Water Works Co. AWK -1.98%decrease; red down pointing triangle and Burger King owner Restaurant Brands International Inc. have taken advantage of an uptick in share prices to raise cash stock sales. QSR -2.39% of their big shareholders have taken advantage. The stock offering by American Water Works, which has been referred to as a follow-on offering, is the largest so-called follow-on offering in the U.S. since June, according to Dealogic. Additionally, in a so-called block trade, an affiliate of 3G Capital Partners Ltd. sold more than $470 million worth of Restaurant Brands stock last week to another affiliate of the firm.

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About $2 billion of the sales were made in the form of block trades, which are transactions in which a bank buys stock from a public company or one of its big investors at a discount and then resells it to investors at a profit. Among block trades of $50 million or greater in February, the average discount paid by investors was 4%, down from 6% in all of 2022, indicating that investors are taking a higher risk in the wake of the worst year for U.S. initial public offerings in at least two decades-and a bad year for follow-on offerings as well.

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Share sales following IPOs, also known as follow-on sales, are often regarded as a leading indicator of future performance. With a recent surge in the stock market, companies eager to list their shares are gaining more confidence, including grocery-delivery company Instacart Inc., restaurant operator Panera Brands Inc., and British microchip designer Arm Ltd. Financial technology giant, Stripe Inc., one of Silicon Valley's most valuable startups, said in a letter to investors in late January that it set a goal during the next 12 months to either go public or allow employees to sell shares in a private-market transaction.

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In the past month, the IPO market has shown signs of thawing, as there has been a marked increase in offerings. As a result of its IPO pricing above expectations in early February, the solar-technology company Nextracker Inc. sold more shares than expected and raised more money than expected. There has been a 40% increase in the stock price since the IPO. Atlas Energy Solutions Inc., an energy company with a plan to list its stock on Thursday, is pitching shares to potential investors this week as they prepare for the listing. Several people close to the deal have told me that there is a good chance of the deal pricing well.

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“Some real green shoots have emerged, with deals across sectors and product types,” said Daniel Burton-Morgan, head of Bank of America's equity capital markets syndicate for the Americas region.

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It is not the first time that there has been a false dawn since IPO activity fell off a cliff more than a year ago, and this could be one of them as well.

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Towards the end of 2022, a brief wave of secondary stock offerings stoked bankers' hopes, but no rush of initial public offerings followed.

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Some investors and analysts believe that secondary share sales can be seen as a sign that a company isn't bullish about the prospects for its stock.