A year ago, IPOs were abundant, but the window has for the most part largely closed. Spinoffs are increasingly moving into the spotlight.
A nasty market environment is taking its toll on investment banks and rating agencies as seen from a lack of IPOs as tight credit markets are limiting transaction activity. Another fly in the ointment is that as private equity becomes more «democratized,» increasingly more companies are opting to partner with private equity firms to help them expand.
Despite the adversity, there are bright spots. For example, Credit Suisse is riding a trend right now with its planned spinoff from CS First Boston. Spin-offs are becoming the new initial public offerings (IPO) on Wall Street.
Strong Increase
To be sure, the number of IPOs is down 59 percent year-over-year. Meanwhile, corporate data from Wall Street Horizon, covering over 9,000 companies worldwide and more than 40 event types, shows a sharp increase in spinoffs over the past year. There were 40 «significant» spinoffs through the end of September, the highest level since 2016.
US semiconductor company Intel, for example, caused a stir in the markets at the end of October with its spinoff of Mobileye Global. Although the chip giant had originally hoped for a higher valuation, the spin-off of the former self-driving car division was a success.
