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Q3 2021 Capital Markets Watch

IPOs slow from historic first half

IPOs had their busiest third quarter in 20 years, although there was a significant decline compared to the first quarter of 2021. In a near-record stock market and with an abundance of dry powder available, the environment for IPOs and capital raising remains supportive, albeit with uncertainties around potential shocks to the US and global economy in the short term. Looking ahead, the IPO market will depend on economic, health and geopolitical conditions to set the pace for the remainder of the year.

The US economy has moderated as the delta variant of COVID-19 spreads, fiscal impulse diminishes and capital and labor supply constraints persist. But while peak growth is likely behind us, we remain positive about the outlook and expect improving health conditions, strong household fundamentals and gradually easing supply constraints to keep growth above trend over the next few quarters. Our baseline expectation now is for real GDP to rise at an annual rate of 5.7% in 2021, with some strength carrying over to next year, and ultimately settling at a long-term trend of around 2%.

“While some uncertainty remains with COVID-19 variants, the combination of rising vaccination rates, increased consumer spending and a resilient economy overall have created a favorable environment for raising capital and considering whether to go public.”

— Daniel Klausner, Capital Markets Advisory Leader, PwC US

2021 IPO frenzy slows


  • Q3 2021 saw 82 traditional IPOs, which raised $27 billion, a 17% decrease in volume and a 33% decrease in proceeds compared to Q2. In contrast, special purpose acquisition company (SPAC) volume increased by 38%.
  • Pharma and life sciences (PLS) led traditional IPO volume in Q3, with 32 IPOs raising $5 billion. Technology IPOs followed with 27 IPOs raising $12 billion.
  • IPOs outperformed broader markets in Q3, with an average return of 17%, while equity markets remained flat.
  • Investor interest in IPOs is likely to remain strong into the end of the year, with more than one in five IPOs doubling the market return.


  • The third quarter saw 88 SPAC IPOs, which raised $16 billion, a 38% increase in volume from the second quarter. 
  • The third quarter also saw 59 SPAC mergers announced, which was down more than 20% from the record number of merger announcements in the first quarter. Seventy-one companies completed their SPAC merger processes.
  • SPACs who have announced mergers in Q3 have shown a negative return of 1%, underperforming the broader market indices. Private investment in public equity (PIPE) investors are facing challenges and increased scrutiny, which may affect some SPAC merger activity. However, we think SPAC mergers could remain a pivotal force in 2022.
  • There is nearly $120 billion in cash on the sidelines in SPACs that have yet to announce a merger.

Venture capital

  • Venture capital (VC) firms continue to invest at a record pace, with $58 billion in 1,239 deals in Q3, of which 539 were late-stage deals.
  • Technology and biotechnology companies continue to raise the majority of VC capital. Innovation remains robust in artificial intelligence, data analytics, therapeutics and life sciences.
  • The third quarter had 391 VC exits, of which 52 were IPOs. The pipeline for VC exits is strong, with nearly 450 late-stage companies with a valuation of $1 billion or more. 
  • We anticipate continued investment in disruptive technologies such as blockchain, automation, genomic therapy and other health technologies as the next era of innovation seeks to revolutionize the human experience. Venture capital began 2021 with $270 billion in dry powder. 

Debt markets target tapering announcement

US debt markets raised $622 billion in Q3 2021. We expect the debt markets to continue their roll through the end of 2021, supported by favorable underlying economics such as employment numbers and earnings, with deals funding M&A, leveraged buyout (LBO) transactions and refinancings. At their September meeting, FOMC members announced that they will begin to taper if economic progress continues as anticipated.

  • The investment-grade bond market raised $316 billion, with 54% of proceeds supporting corporate needs, such as working capital and operating expenses, as seasoned issuers lock in low rates ahead of a potential rate increase.
  • US leveraged finance issuance (high-yield bonds and leveraged loans) has already set an annual record for proceeds raised in a year, with more than $1 trillion through just three quarters in 2021.
  • The high-yield bond market is on pace to reach an all-time annual record. Issuers in Q3 raised $108 billion, with the consumer markets and industrial products sectors each contributing 23% of issuance; $32 billion of proceeds supported M&A and LBO activity.
  • Borrowers raised $198 billion in the leveraged-loan market, an increase of 124% compared to Q3 2020 as lenders look to floating-rate debt in the face of inflation and economic growth concerns. 
  • The market will continue to focus on the Federal Reserve policies as the 10-year US treasury yield sits near its highest level since June 2021.

Please note: IPOs with deal values that are less than $25 million, best efforts offerings, oil and gas royalty trusts, business development companies, IPOs pricing on OTC Bulletin Board or OTC Pink Sheets are excluded from this narrative. Venture capital data is for US headquartered companies with minimum deal size of $1 million and a minimum pre-money valuation of $5 million. Data from SEC filings and third-party databases as of September 30, 2021.


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Mike Bellin

Mike Bellin

Partner, IPO Services Co-Leader, PwC US

David Ethridge

David Ethridge

IPO Services Co-Leader, PwC US

Daniel Klausner

Daniel Klausner

Capital Markets Advisory Leader, PwC US

Doug Chu

Doug Chu

West Coast Capital Markets Advisory Leader, PwC US

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