Just yesterday, the Federal Reserve announced the first rate cut since March 2020. Will lower Fed rates be the long-awaited catalyst for deals?
The temperature may be changing as fall approaches, but capital markets are warming up as companies IPO and others join the queue to list, especially in the U.S. market. While volumes may not yet compare to the heights of 2021, they have improved of late - and are expected to grow.
Hong Kong could become a surprise bright spot if Alibaba’s cross-share listing from the mainland to the Hong Kong Stock Exchange (HKSE) goes well. Increased liquidity is the goal as China’s economy continues to struggle.
On the technology front, GenAI remains all the buzz, attracting big checks as companies look for ways to make the most productive use of the energy-hungry technology.
And in the media and entertainment sector, live sports coverage is the hot ticket for streaming services that want to build out their offerings in an increasingly competitive space.
With the presidential election cycle in full swing and debates garnering much of the attention there are many unknowns impacting future economic and business performance. We expect the political uncertainty to influence activity through the rest of the year. Stay tuned.
See all the details below.
Capital Markets
United States
Fall is historically the season for U.S. markets to gain momentum heading into the end of the year. Economic indicators suggest a strong economy, lower inflation, a relatively stable labor market, and, after years of tightening, the much-anticipated interest rate cut by the Fed came to fruition. This backlog of deals is anticipated to drive an uptick later in the year and into 2025.
IPO value hit $32 billion so far this year, more than double last year’s figure, but that’s still a far cry from $240 billion over the same time period in 2021.
According to Citigroup, Inc. there are a number of tech companies considering an IPO in Q4, especially those in high-growth areas that are expected to perform well in any market. And companies are lining up for possible early 2025 IPOs like Switch, the data center operator, which is exploring a listing valued at $40 billion.
Asia
Chinese overseas listings continue to climb, with 118 companies receiving approval so far this year. That’s more than all of 2023 with a quarter left of the year. 120 more companies are in the queue. Beijing appears to be supporting the go abroad strategy of international IPOs.
Hong Kong is also seeing an uptick in activity, with 40 percent of fundraising driven by the software and service industries. Chinese investment banks are taking the lead in sponsorship and underwriting businesses while foreign investment bank activity declines.
Alibaba is taking advantage of the Stock Connect program that links mainland exchanges to Hong Kong. The company, upon approval, will have dual primary listings on the Hong Kong Stock Exchange in addition to its U.S.-based NYSE trading. This is expected to increase liquidity of its shares and provide greater flexibility to shareholders. The listing will not involve issuance of new shares or new fundraising.
On the China regulatory front, PWC is facing massive fines and a potential six month ban over its work with Evergrande, the real estate behemoth that declared bankruptcy last year. The firm would be barred from signing off on financial reports and IPOs as well as restrictions on other types of financial transactions. And fast fashion retailer Shein reported two cases of suppliers employing child labor in its latest Sustainability report.
Elsewhere in Asia, South Korea’s first online-only bank, K Bank, is expected to raise approximately $732 million in an IPO this year. K Bank had an operating profit through the first half of 2024 and is expected to sell 82 million shares, half newly issued and half from existing shares.
Technology
Both the mainstream and institutional investor market are focused squarely on AI, though some Wall Street analysts don’t seem too impressed at the moment.
Amazon CEO Andy Jassy said their AI assistant Amazon Q saved thousands of years of work and millions of dollars to drastically reduce the time it takes for software updates. In one startling example, the latest Java 17 application upgrade took hours instead of 50 developer days to achieve.
Improving the bottom line like this is the real game changer. Microsoft estimates that 60% of Fortune 500 companies are using its Copilot AI assistant. According to Debanjan Saha, CEO of DataRobot, to make AI truly useful, companies must increase its value, confidence in its use, and demonstrate the expertise to use AI effectively.
So far, however, much of the focus has been on AI content generation. That has brought on a slew of problems like deepfakes, despite companies developing audio and video avatars ahead of regulations. Many in the media and entertainment industry are skeptical about the potential impact of AI on creative jobs. Others, like Twitch CEO Dan Clancy, think GenAI will be a boon for live streaming creators, as long as they maintain the human connection.
Time will tell how GenAI impacts industries and whether serious revenue streams can materialize.
Media and Entertainment
Streaming sports ad revenue is quickly becoming the brass ring for online services jockeying to get the best lineup of games for their viewers. This summer saw a flurry of media deals, many focusing on sports coverage including the NBA selling broadcast rights to Amazon and Comcast’s NBCUniversal while leaving out Warner Brothers who is now suing the league.In recent months, ESPN, Fox and Warner Bros.
Discovery launched a new sports channel, Venu. The NFL’s recent slew of media rights deals with streaming services Amazon Prime Video, Google’s YouTubeTV, and NBCUniversal’s Peacock showcases the league’s push to broaden its fanbase and audience, speakers at CNBC x Boardroom’s Game Plan event said recently. Netflix also grabbed Christmas Day games for the next three years and Comcast launched a Peacock, Netflix, and Apple TV+ bundle with thousands of hours of sports programming.
These deals are taking us into this new season with sports picking up, so it will be interesting to see how it plays out. DirecTV viewers found out recently that losing ABC from the network meant they couldn’t watch the U.S. Open Tennis, college football opening day games, or the presidential debate.
Thank you for reading this month’s News to Use. If you think your firm would benefit from a customized version of issues relevant to your customers, please let us know.
Until next month,
- Rachel