It's been a watershed year for equity capital markets as investment banks toggle soaring stock prices, traditional initial public offerings, and special purpose acquisition vehicles.
To cash in on that momentum, Citi's eyeing future IPO potential and has boosted personnel in private capital markets.
It's targeting young companies in areas of growth like tech or healthcare that Citi can nurture through private markets, like early-stage financing events, before potentially tackling public markets.
"Historically, we believed you had to be in the LBO [leveraged buyout] to best position for the IPO. Today, you need to be in the pre-IPO to be in the IPO. We need to become important to these companies earlier in their life cycle," Doug Adams, Citi's global co-head of equity capital markets told Insider.
Citi has recently nabbed four bankers to bolster the team. Directors Blake Best and Greg Werntz, along with Vice President Michael Castelli are joining from Bank of America's private capital markets group in the coming months, a spokesperson for Citi confirmed. Alex Abramovitz, a vice president with JPMorgan in Hong Kong, will also join Citi to cover privates across Asia. Abramovitz will focus on late-stage private companies, the spokesperson said.
These additions come after Citi hired John Collmer as its global head of private capital markets from Bank of America, and Brian DeLeo, a managing director from UBS to focus on tech ECM, last month.
"We've been active in private capital raising for a long time, but what we haven't had is much-dedicated infrastructure [for] pre-IPO capital raising," Adams said.
Year-to-date, approximately $256 billion in ECM deals have crossed the tape for US-based companies, up from $239 billion at the same time last year. A further $114 billion in SPAC IPOs have been raised to-date this year, well ahead of the $30 billion raised during the same period in 2020, according to Refinitiv data.
Citi sits sixth for overall US ECM activity, but it's number one in US SPAC IPOs, having led 84 transactions worth about $16.7 billion collectively, Refinitiv's data showed.
Beyond the SPAC frenzy
SPACs raise capital through an IPO without revenue or assets. As blank-check companies, investors are taking a leap of faith with these acquisition vehicles, which have about two years to find a target company to take public.
Investors pounced on the chance to bet on companies with high-growth potential, but financing for SPACs became more scarce and the Securities and Exchange Commission is set to rein in projections that SPACs can make. Retail investors, too, have pumped less cash into SPACs in recent months, with many of the vehicles underperforming against the S&P 500 index.
Adams, however, is starting to see some SPACs come good on investments.
Citi helped Aspiration Partners, an financial services firm focused on sustainability measures, merge with investment firm InterPrivate Capital's SPAC on Wednesday. And last month, Citi worked with software company ServiceMax on its merger with Pathfinder, a SPAC led by private-equity firms HGGC and Industry Ventures.
"There's still a significant IPO backlog. The question is, are some of those ever going to come to market. For the right sponsor and structure, there's an ability to get an IPO done," Adams said.
While US SPAC IPOs have cooled, Adams is encouraged by proceedings in Europe and Asia. Earlier this month, the UK's regulator relaxed some rules for SPACs, while Singapore's stock exchange sought market feedback over a regulatory framework for SPACs in March.
"SPACs are more global," Adams said. "But it's not all about SPACs. We're spending a lot of time on emerging growth. Tech, Fintech, consumer tech, health tech, etc. There's a lot of sectors going through interesting evolutions."
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