Wall Street bosses see deal drought easing as IPOs spur optimism

Goldman Sachs CEO David Solomon speaks during the Goldman Sachs Investor Day at Goldman Sachs Headquarters in New York City, U.S., February 28, 2023. REUTERS/Brendan McDermid

NEW YORK  -Wall Street investment bankers are optimistic that dealmaking will pick up as new initial public offerings (IPOs) hint at a broader recovery.

Goldman Sachs CEO David Solomon told Reuters in an interview on Tuesday that the optimism that the U.S. economy will avoid a recession is prompting capital markets to reopen.

“The environment is definitely better,” said Solomon, who noted that Goldman was involved in most of the share offerings. “They’re meaningful, they’re going well,” he said.

SoftBank Group Corp’s Arm Holdings, a British chip designer, will likely be able to price its IPO at the top or above its range of $47 to $51 per share when its underwriters close their books on Wednesday on the biggest U.S. stock market debut in two years, according to people familiar with the matter. Grocery delivery service Instacart also plans to list its shares.

“There’s activity under the surface, the ducks are paddling furiously and we’ll just see over the next few months how much they move,” Barclays CEO C.S. Venkatakrishnan told investors at a conference in New York.

But he added some conditions needed to be met for deals to be reactivated, including stable market conditions, availability of financing and attractive asset prices.

“In financial assets, you have seen the correction over 18, 24 months, and we may be getting to that point,” Venkatakrishnan said.

Morgan Stanley’s head of investment management Dan Simkowitz told the conference he foresaw a “meaningfully better” environment for deals next year, citing an improvement in capital markets spurred by a rising number of IPO and mergers and acquisitions announcements.

Bank of America expects investment banking fees to drop as much as 35% in the third quarter across the industry, but BofA will probably fare better than that, its finance chief Alastair Borthwick said on Monday.

The dealmaking slowdown had prompted thousands of layoffs at investment banks, including at Morgan Stanley, Goldman Sachs and Citigroup in recent months.