Wall Street Wishes for a Gold Mine

Bankers are famished. The market for mergers and acquisitions is some $1 trillion shy of last year, and financing for deals has withered. This is the worst year for initial public offerings since the wake of the financial crisis in 2009. With a dearth of deals at so many levels, it’s no wonder so many dealmakers have lost their jobs.

After Labor Day, there’s reason for a dose of optimism, if not outright hope. Goldman Sachs, JPMorgan Chase and some two dozen other banks will market the listing of SoftBank’s Arm, potentially one of the largest IPOs ever. Instacart’s and Klaviyo’s public debuts look promising, too—after all, they’re already profitable. The “grow-at-all-costs-and-ask-questions-later era is gone,” Phil Haslett, co-founder of EquityZen, said in a Bloomberg Television interview this week. Uber, DoorDash and Lyft all trade below their IPO prices, he noted, while WeWork is on the brink of bankruptcy.

Haslett’s company tracks 1,400 unicorns that could eventually go public. “A lot of them are not doing well, but some of them are,” he said. For investors who’ve held illiquid stakes for years and are eager to find an exit, according to Haslett, there’s really only a three- or four-week window to consider this year.

Venture investors are joining private equity firms, who are hoping to exit investments through IPOs and other transactions.

That’s also partly why M&A could yet stage a comeback. Some $15 billion of risky buyout debt could finance private equity and corporate takeovers, Jill Shah and Michael Tobin reported for Bloomberg News. Deals to watch after Labor Day include more than $8 billion of debt tied to GTCR’s purchase of a large stake in Worldpay and, eventually, private equity firm Roark Capital expects to borrow nearly $5 billion in an esoteric, structured debt market to finance its purchase of Subway, the sandwich chain.

Buyout firms are looking to exit old holdings just as much as they’re trying to spend $2.5 trillion of “dry powder,” or unspent money they’ve accumulated—a record figure for the industry that’s larger than the gross domestic product of Canada. With markets whipsawing, they’ve been saddled with their older assets, unable to collect meaningful profits to disburse to investors and staff.Doesn’t sound like much of a gold mine. More like panning for speckled nuggets—aka fees—which gives you a sense of just how bleak things have been for dealmakers of late. Speaking of which, Goldman Sachs leads the way on underwriting IPOs this year, followed by Citigroup. Goldman, however, still trails JPMorgan on M&A volume, according to Bloomberg data—a space it’s led for years.

But how’s this for hope: It’s not even Labor Day yet. To read this newsletter online in its entirety, you can find it here. And to sign up for Bw Daily, for which I write every Friday, you can do that here.