(relaxed music)
-: Indeed, IPOs are often used as a synonym
However, looking at our extensive database
of more than 5000 IPOs,
we find that, over the last 20 years
only 41% of IPOs in fact raised 100% fresh capital.
34% of IPOs offered a mix of existing and new shares,
and 26% of IPOs did not offer any new shares at all.
Beyond raising fresh capital,
there are three major motivations to do an IPO.
First, the listing provides existing shareholders
a good opportunity to sell down all or parts of their shares
to a new and broad set of investors.
And additionally, the IPO also provides them
with a platform to sell down
their remaining shares in the future.
Second, the IPO also provides an opportunity to monetize
carved-out entities out of a large conglomerate,
a strategy we currently see around the world.
And third, the IPO also creates an acquisition currency
that can flexibly be used in future M&A transactions.
Yes indeed, the level of capital raised
has a significant impact
on the performance of the stock post-IPO.
When looking at our 5000 IPOs since 1990,
we find that those IPOs who have offered only existing
shares returned 23% total shareholder return
in the first 12 months post-IPO.
IPOs that offered both a mix of existing and new shares
returned 18%.
But those IPOs who only offered new shares returned only 6%.
This significant gap is stable over time
and also true for different time windows
around the IPO date.
And it even widens for companies
that have a very weak growth trajectory before the IPO.
And the difference also gets bigger
if you look into tech and telco,
whereas in industries like consumer, industrial,
and energy, the gap narrows.
We believe the differences are due to the signaling effect
associated with a public listing.
If the listing is looking for fresh capital,
investors just expect the capital to be used
to deliver value-accretive growth.
And if the equity story of the company
doesn't look credible in this regard,
and/or if the company is not living up to the plan,
investors will punish the stock.
To mitigate this risk, companies,
especially those who want to raise a substantial amount
of fresh capital,
need to develop a very strong and convincing equity story,
with clear and actionable growth initiatives,
to persuade investors.