Achintya Mangla new

Achintya Mangla, JPMorgan’s global co-head of equity capital markets, argues all key metrics point to an active 2021 for equity raising.

“We think this is going to be one of the largest years in initial public offerings (IPOs), globally. And that is even before I talk about special purpose acquisition companies (SPACs),” observes Achintya Mangla, global co-head of equity capital markets (ECM) at JPMorgan, who believes there many reasons to be bullish about ECM activity in 2021.

Following what was a record-breaking year for equity-raising activity, in large part driven by Covid-related factors, such as the need to raise liquidity, 2021 is already shaping up to be busy year, with the first three months proving another bumper quarter. However, the composition of activity in 2021 will likely be very different. Mr Mangla says: “In 2020, we saw a lot of large recapitalisations, off the back of Covid, balance sheet strengthening exercises and some large sell downs by existing shareholders. I think some of that will continue, but 2021 will also see a very heavy pipeline of IPOs.”

Career history: Achintya Mangla  

  • 2020 Co-head, global equity capital markets (ECM), JPMorgan
  • 2013 Head of Europe, the Middle East and Africa ECM, JPMorgan
  • 2010 Head of Asia ex-Japan ECM, JPMorgan

He believes the benign economic circumstances supported by central bank interventions, the continuing low interest rate environment and investors laden with capital that they want to deploy, along with some “pretty steep growth in earnings per share” in the past year, is creating a very attractive valuation framework and environment in which to raise equity capital.

With vaccination programmes gaining traction in major economies such as the US and UK, and Europe to a lesser degree, and pent-up consumer spending demand, he believes the positive factors continue.

Pandemic disruption

Covid-19 has been a highly disruptive force, not only in terms of the challenges it has caused for companies operationally, but in amplifying existing trends around technological innovation and shaking up business models. It has been a key moment for Mr Mangla and his team, not only in serving existing clients through a difficult period, but also to think about the companies of the future which may want the benefit of the bank’s global ECM capabilities.

“A clear priority has been advising our current clients on the best way to get through this period,” he says, “as well as to grow and position themselves for a post-Covid world.”

Additionally, he notes: “There has been an acceleration in innovation and disruption, across many sectors at a global level, with a very large number of private companies having grown quicker than they would have otherwise.”

For Mr Mangla this cohort of fast-growing companies is very much a target client base. He says: “We are very keen to partner with these growing companies, welcome them to the public markets and really provide them with all the support they need across the merger and acquisition and equity spectrum.”

Innovation in listings options

The forces of innovation driving change across the global economy are not only shaking up the business models of companies, but the equity-raising landscape is itself also being redrawn quite considerably. Mr Mangla points to the growing range of options for companies seeking a stock exchange listing as evidence “that innovation could be in the form of modified IPOs, direct listings, listings via an auction structure or traditional IPOs — we want to provide our clients with various options”.

But it is SPACs that have really captured the market’s imagination during the past 12 months. SPACs are shell or 'blank cheque' companies which list via an IPO, and are often backed by a high-profile sponsor with the explicit purpose of raising capital to acquire a company, typically in a specified high-growth area like technology or healthcare. When a company merges with a SPAC it effectively goes public during that transaction, so it can also be an attractive way for target companies to list without having to go through the full process of an IPO.

Last year, more than $80bn was raised via SPAC IPOs, compared to just $13.5bn in 2019. During January and February 2021, more than $60bn has been raised via SPAC IPOs.

Through the entire SPAC lifecycle

The challenge, as more and more SPACs list, will be to find suitable target companies for their capital to be invested into. SPACs typically have a period of two years to make an acquisition, otherwise the company will be liquidated and capital returned to investors. Mr Mangla believes banks, including JPMorgan, need to be sensitive to this, and not regard it as “job done” once the initial capital has been raised.

“We are focused on being there for our clients throughout the entire lifecycle of a SPAC, as opposed to just focusing on raising the front-end money,” he says. “We want to partner with clients and take them all the way through the journey of finding and acquiring the asset. And that means we will be more selective than some of our peers in terms of the SPACs we get involved in.”

All the proposed changes bring London in line with other financial centres... it makes a pretty powerful proposition for clients around the world to look at London in a fresh light

Achintya Mangla, JPMorgan

To date, SPACs have primarily been a US-driven phenomenon with the vast majority of capital being raised in New York, even if the target company has been outside of the US. However, there are signs of the European market opening up.

Mr Mangla suggests we should expect to see growth in the number of European listed SPACs, pointing to the efforts of European exchanges which he believes have “moved quite rapidly” to adapt to this type of listing. Although he acknowledges the scale of activity is unlikely to match that in the US anytime soon, “we are in the early innings, but it is clearly an interesting and important trend”.

For JPMorgan’s part, it recently advised on the first ever tech-related SPAC listing on the Frankfurt Stock Exchange (and the exchange’s first SPAC listing in more than 10 years) for venture capital firm Lakestar, fronted by German tech investor Klaus Hommels. It is also advising on the Pegasus SPAC, led by LVMH founder Bernard Arnault and former UniCredit chief Jean Pierre Mustier, which is due to list in Amsterdam.

In Asia too, in recent weeks, both Singapore and Hong Kong’s stock exchanges have made moves to make themselves more attractive for SPAC listings, and Mr Mangla believes this is another area to keep an eye on. “There is a large set of private companies in Asia-Pacific with fantastic equity stories and keen to be publicly listed,” he says. Hong Kong and Singapore will be optimal listing locations for some of these and, in this context, Hong Kong and Singapore listed SPACs will provide yet another capital market tool for Asian corporates.

European competition

Back in Europe, the competition between exchanges to attract listings — SPACs or otherwise — certainly appears to be heating up, particularly in a post-Brexit context. Mr Mangla is careful to avoid picking any favourites, praising Paris, Amsterdam and Frankfurt as good options for companies, in the context of SPAC listings. However, he does concede there is something of a “buzz” around Amsterdam at the moment.

For the London Stock Exchange (LSE), he notes that some constraints remain, particularly in relation to SPACs. However, the recent Hill review, which proposed a number of significant changes to UK listing rules, with the explicit aim of attracting more listings including high growth companies and SPACs, looks certain to shake things up.

“Looking at all global financial centres, London has always been prominent, standing for high corporate governance standards and a centre with large pool of capital among investors,” he says, adding: “All the proposed changes bring London in line with other financial centres, but when you combine that with the advantage it already had, it makes a pretty powerful proposition for clients around the world to look at London in a fresh light.”

The food delivery platform Deliveroo is one firm that appears to have responded very quickly to the proposals, announcing its intention to float on the LSE with a dual class share structure, something which had not previously been possible. JPMorgan is acting as joint global coordinator on that deal.

Cornerstone support

This is the latest in a strong pipeline of European, Middle Eastern and African (EMEA) tech IPOs for the bank; it has led on 18 since 2018 — 50% more than any other bank, it claims. It points to its leadership in securing cornerstone investors — high-profile investors who commit to investing in a substantive proportion of shares prior to an IPO’s formal listing — as a key part of its success. For instance, in early March it assisted the global online reviews platform Trustpilot to secure $240m of cornerstone investment ahead of its upcoming IPO, and in January it assisted a Polish parcel locker business to secure more than €1bn of cornerstone investment ahead of its IPO, the largest-ever cornerstone commitment at launch in EMEA.

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