By Tom Zanki

Law360 (March 5, 2020, 5:41 PM EST) -- Two law firms eked ahead of peers in initial public offerings activity during February, a traditionally soft month for IPOs that closed quietly amid coronavirus-related fears that are clouding the outlook for deals going forward. 

Latham & Watkins LLP steered three IPOs — when counting representation of issuers and underwriters — that raised more than $1.9 billion, more than any other firm. The firm's work was highlighted by a $1.62 billion IPO by drug development services company PPD Inc., in which it represented the underwriters. Simpson Thacher & Bartlett LLP represented the company

Davis Polk & Wardwell LLP guided four IPOs, advising underwriters each time, the highest number of deals guided by any firm. Davis Polk steered underwriters on two IPOs involving life sciences businesses, as well as ones for Canadian trucking company TFI International Inc. and a blank check company.

Another six firms steered multiple offerings in February. Winston & Strawn LLP guided three IPOs, while Cooley LLP, Greenberg Traurig LLP, Skadden Arps Slate Meagher & Flom LLP, Ellenoff Grossman & Schole LLP and Loeb & Loeb LLP guided two each.


On the whole, 21 issuers went public last month, raising nearly $4.9 billion. The total includes seven offerings by blank check companies, which are shell entities without operations that raise money through IPOs in order to pursue acquisitions. These vehicles are often run by management teams consisting of executives or private equity players with expertise in a particular sector.

February is a traditionally quiet month for IPOs, which typically heat up as spring arrives. The lull was partly due to a mid-month regulatory deadline that requires most prospective public companies to update their financial statements to include audited figures for the prior year.

Only two operating businesses went public in the second half of the month. The recent market volatility — the Dow Jones Industrial Average lost more than 3,500 points last week on coronavirus fears — has made pricing conditions unpredictable for IPO candidates.

While operating companies have gone into relative hibernation since mid-February, blank check companies continue to generate steady IPO activity, supplying one third of the month's activity.

Notably, Churchill Capital Corp. III, a blank check company run by former Citigroup executive Michael Klein, raised a whopping $1 billion. It was only the fourth blank check IPO globally to raise at least $1 billion, according to Dealogic. Paul Weiss Rifkind Wharton & Garrison LLP advised Churchill Capital, while Winston & Strawn guided underwriters.

Churchill Capital went public as the market for blank check companies — also known as special purpose acquisition companies, or SPACs — is coming off a record year. SPACs raised $13.5 billion through 59 IPOs last year, according to data provider Dealogic.

Blank check companies, nearly all of which price their IPOs at $10 per share, are less sensitive to pricing conditions. Such companies have no operations until they complete an acquisition, which usually occurs within 24 months after the IPO. Capital markets lawyers expect continued activity from blank check companies, five of which filed IPOs last week.

"There is a big pipeline of more SPACs to come," said Davis Polk partner Yasin Keshvargar, whose firm advised underwriters for Citic Capital Acquisition Corp.'s $240 million IPO.

In terms of operating companies, it isn't clear yet when the market will rebound. Only one company is scheduled to price an offering during the week of March 9, according to IPO research firm Renaissance Capital. Imara Inc., a venture-backed biotechnology firm developing therapies for rare genetic disorders, expects to raise about $76 million next week.

Several other companies have filed IPOs and are eligible to begin marketing roadshows, but have yet to launch plans.They include Warner Music Group Corp. and building products manufacturer The Azek Co., both of which filed IPOs in early February.

Six more operating businesses filed IPOs last week that could price by the end of March, assuming a typical IPO timetable. Home rental giant Airbnb Inc. is also a rumored candidate, following its announcement in September that it filed confidential IPO plans with regulators. But Airbnb has yet to publicly file plans for what is expected to be one of the largest IPOs of 2020.

Lawyers say companies are sorting out what impact the coronavirus may have on their operations, particularly those involved in travel or with international supply chains. Keshvargar expects that more companies will make IPO plans public in the coming weeks, which will enable them to launch marketing roadshows when conditions appear favorable.

"Companies are coming to the conclusion that if you want to do an IPO in 2020, be ready to go as soon as possible and launch when you can," Keshvargar said.

Given the uncertainty associated with the U.S. presidential election in November, Keshvargar noted that companies still prefer to go public sooner rather than later. He said lawyers and investment bankers continue to receive inquiries from prospective IPO candidates.

But market conditions this week have done little to relieve anxiety. The Dow Jones Industrial Average fell 969 points Thursday, the latest of several steep drops that have roiled markets and have made it harder for companies to time their IPO plans.

"If companies pull back earnings and estimates, confirming the virus' broader impact, we can expect there will be a real chilling effect on IPOs," O'Melveny & Myers LLP partner David Makarechian said in a statement on Thursday.

If the IPO outlook for early 2020 goes south, attention could shift toward midyear, Makarechian said.

"If the Federal Reserve keeps rates flexible, the virus is brought under control and stability returns to the markets, [the IPO market] can still have its big moment later in the year," Makarechian said.

--Editing by Kelly Duncan and Alanna Weissman.

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