With a bulging pipeline of Reg A+ IPOs set in 2018, it’s worth asking: Just how much volume can the market bear?
IPOs of $50 million or less, the current ceiling for Reg A+ issues, peaked just over two decades ago at a peak of nearly $13 billion, according to data provided by Dealogic. That compares with a mere $470 million in 2017.
Reg A+ is likely to attract a raft of small companies to public markets that otherwise wouldn’t consider such a path. Looser restrictions on marketing and the ability to target retail investors will go a long way for companies in the consumer sector, in particular.
But it’s worth remembering just how different times were in the mid 1990s. For one, burgeoning markets were driven in large part by a technology bubble. While some may argue valuations are stretched, the market is unlikely to see dot-com euphoria to the same degree.
What’s more, there were far more small investment banks around to underwrite deals in the 1990s. Many of those firms profited from fractional trading, which is now ancient history.
Even so, there is plenty of reason for enthusiasm around Reg A+ issues. Companies and exchanges – not to mention investors – are keen to see a microcap IPO renaissance. While a $13 billion year isn’t likely again, a few billion isn’t far fetched.