What is an IPO and why does it matter for these stocks?

An IPO (Initial Public Offering) is when a company first sells shares to the public on a stock exchange. This matters because companies in this collection—like exchanges, investment banks, and financial services firms—earn substantial fees from facilitating these offerings. When IPO activity increases, as it has with the NYSE's record $61 billion in capital raising, these companies typically see higher revenue from listing fees, underwriting charges, and increased trading volumes.

What does "underwriting" mean in the IPO process?

Underwriting is the process where investment banks (like Goldman Sachs or Jefferies in this collection) help companies go public by setting the initial price for their shares, purchasing those shares, and then reselling them to investors. The underwriters earn fees for this service, handle regulatory requirements, and help promote the offering to potential investors. When the IPO market is booming, underwriters can earn substantial revenue, making them attractive investments during periods of high IPO activity.

Why are stock exchanges included in this collection?

Stock exchanges like NYSE (owned by ICE) and Nasdaq (NDAQ) directly benefit from IPO booms in multiple ways. They earn initial listing fees when companies go public, ongoing listing fees as companies remain on the exchange, and additional revenue from the increased trading volume that comes with new listings. The record $61 billion raised on the NYSE represents significant fee income, making exchanges key beneficiaries of an active IPO market.

What is the difference between major investment banks and middle-market banks in this collection?

The collection includes both major investment banks (like Goldman Sachs and Citigroup) and middle-market banks (like Stifel and Oppenheimer). The difference is primarily in the size of the deals they handle. Major banks typically underwrite larger IPOs from bigger companies, while middle-market banks focus on smaller offerings. Including both gives investors exposure to the entire IPO ecosystem, as different sized companies choose to go public with different banking partners.

How does a "booming IPO market" affect brokerages and trading platforms?

Companies like Interactive Brokers (IBKR) and Tradeweb (TW) benefit from increased IPO activity because new public offerings tend to drive higher trading volumes and attract new investors to the market. IPOs generate excitement and media coverage, often bringing in first-time investors. The increased market participation leads to more trading activity, account openings, and asset growth for these platforms, creating a positive ripple effect throughout the financial ecosystem.

15 handpicked stocks

Capitalizing on the IPO Boom

A collection of carefully selected stocks that stand to benefit from the surging IPO market. Our professional analysts have identified the financial firms, exchanges, and investment banks that facilitate and profit from this increased capital raising activity.

Han Tan | Market Analyst

Updated 2 days ago | Published at जुलाई 2