Global Strategy 15 Essential Charts: Do mega IPOs signal a market top?

Research evidence excerpt

Global Strategy 15 Essential Charts: Do mega IPOs signal a market top?

supply negative. +91-22-6155 6080

Henry Morrison-JonesEarnings can step up where valuations don't, but watch margins

Strategist

Net equity supply is negatively related, and buybacks are positively related, to equity

henry.morrison-jones@ubs.com

valuations. Higher capex, and therefore weaker free cash flows, may reduce buybacks +44-20-7901 6656

just as increased selling (supply) of secondary issuance may also make net equity supply

Marc el Koussaless negative. The valuation tailwind for equities may fade somewhat. But the same

factor that leads to more equity supply – strong capex growth from companies – can

marc.el-koussa@ubs.com

drive earnings to themselves deliver respectable market returns. More than IPOs or +44-20-7567 0298

buybacks, investors will need to watch the ROI on current capex, and whether record

Shreyas Gunturmargins across most sectors can be sustained.

shreyas.guntur@ubs.com

1.2026 is shaping up to be a record IPO year +44-20-7567 0886

2.Large IPOs have historically been followed by lower returns

3.Market growth has outpaced IPOs; IPOs remain modest relative to market cap.

4.At prior tops, issuance peaked both in $s & rel to market cap. That's not true today.

5.By deal count, too, 2026 is a regular year—not a late 1990s-style outlier

6.Secondary issuance a bigger driver of equity supply than are IPOs

7.Buybacks will keep US ‘net’ equity issuance negative despite large IPOs

8.More valuation support from buybacks & net negative equity supply than in prior tops

9.Moving forward US buybacks may fall as capex picks up and FCF falls

10.High valuation of equities to bonds may also discourage companies from buybacks

11.Issuance rel to market size larger in credit than in equities.