30th May 2024

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Business Industry and Financial

Investment banks feast on block trades as IPOs remain in limbo

While deals were hinged to events like Gina Rinehart’s raid on Liontown or Mineral Resources’ efforts for Wildcat shares, bankers went into October confident equity markets would stabilise.

Mr Troeber said there was a view interest rates would not be “going up materially higher, which calmed markets” somewhat. The conflict in the Middle East, however, led to swings in commodities like oil and investors grew more cautious.

“Markets were looking relatively constructive and stabilising … Then we had a black swan event and markets turned a lot more volatile,” said Mr Troeber, whose team worked on a $165 million block for Ingenia Communities Group last month.

Staffing up

While it has been a down year for corporate M&A activity, global brokers have staffed up to strike meaningful block trades for institutional investors, which are keen to move ASX-listed stocks in response to see-sawing equity markets.

JPMorgan, which did multiple blocks for Ventia Services Group’s IPO vendors this year, hired Ottilia Spencer from Goldman Sachs to focus on small-to-mid-cap equities sales in April.

Mike Johnson agreed to lead Jefferies’ equity capital markets’ syndicate desk, Street Talk reported in April. Jefferies, which did capital raisings for Whitehaven’s acquisition of coal mines from BHP last month, also hired Matthew Moffatt, a director in institutional equities, and picked up former Credit Suisse traders Jessica Toomey and Sam Speer, Street Talk reported in March.

Barrenjoey hired traders from rival shops, while Ord Minnett appointed Alastair Hunter to lead institutional research in December, and outlined a strategy to provide more research in small- and medium-cap stocks.

Equity sales, and block trading in particular, has become an increasingly fragmented market for brokers, traders said. While equities desks enjoyed an uptick in October activity, increased competition from global investment banks and smaller broker dealers, coupled with a slow IPO market, shrunk the potential fee pool for teams.

“It will take a bit more time for confidence in the broader IPO market to return as volatility reduces and valuations stabilise,” Mr Troeber, the JPMorgan ECM co-head, said.

“Clearly things are difficult in markets at the moment. But this can change very quickly. The expectation is that in three to four months things are going to change, so be ready. If there is a window to do something, you need to be ready.”

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