Equity Market Pulse - Weekly Market Commentary (Week of 7/20/20)

General

It was a volatile week in the equity markets that ended with a pronounced divergence between the NASDAQ and the other major indexes. The S&P 500 and Dow both ended the week up with modest gains of 1.2% and 2.3%, respectively, while the NASDAQ fell (1.1%). Banks reported mixed earnings this past week - JPMorgan earnings were cut in half, Wells Fargo posted the first quarterly loss since 2008, while Goldman was the clear winner with the highest quarterly earnings in nearly a decade. BlackRock and Pepsi both beat expectations while Netflix surprised Wall Street with an earnings miss. This week 91 companies in the S&P 500 will report.

IPOs

It was once again a busy week in the IPO markets, but the same three sectors (SPACs, Tech, and Biotech) dominated the activity. On the Tech side nCino, the cloud banking platform, was the runaway of the week after pricing above its revised range to raise $250mm it then closed up 196% - the biggest first day pop in Tech since 2005 (Baidu).

GoHealth, the online insurance marketplace, was the largest deal of the week pricing above the range at $21 per share and raising $914mm, however, it broke issue (down 7%) in a marked departure from other IPOs in first day performance and potentially in sympathy with recent IPO SelectQuote which is down YTD -19%.

Three Biotechs also priced this week with Relay Therapeutics (oncology) raising $400mm, ALX (oncology) raising $162mm, and Pandion Therapeutics (autoimmune diseases) raising $135mm. Also in the Healthcare space, Berkeley Lights, a developer of products and services for biomedicines, genome analysis and cell treatment, priced above its range to raise $178mm and had an incredible first day close up 198%.

The majority of the capital was raised by six SPACs which took in a combined $1.5bn during the week. The most notable was Artius Acquisition which raised $630mm in an upsized offering and has 24 months to find a target. Bill Ackman’s record breaking SPAC also revised its filing and is now looking to raise $4bn (up from $3bn) at $20 a share. Mr. Ackman’s Pershing Square hedge fund has a forward-purchase agreement to invest an additional $1 - 3bn which could give the SPAC $7bn towards purchasing a target. Michael Klein, the serial SPAC sponsor, announced the acquisition of MultiPlan, a healthcare cost management company, with Churchill Capital Corp III while also filing this week to raise $1.2bn with his fourth SPAC.

High Yield Debt Markets

The pace of High Yield issuance slowed this week (earnings blackouts, summer slowdown, fewer M&A financings) with $5.5bn priced, bringing the total tally for July to around $14bn. Of note, Norwegian Cruise Line Holdings revisited the market again this week with secured bonds to raise $750mm. Despite a “no sail zone” extension through Sept 30th, investor demand was strong which allowed the company to price an upsized offering at 10.25% vs price talk in the 10.5% area at launch. Inflows into High Yield funds throttled back after several weeks of strong growth. Only $834mm was reported as inflows.